Following a two-month decline and a year of weak sentiment, the Purdue University/CME Group Ag Economy Barometer closed out the year on a more bullish note, rallying 24 points in December to a reading of 126, said Purdue Ag Economist James Mintert, in a joint release.
The Ag Economy Barometer is calculated each month from 400 US agricultural producers’ responses to a telephone survey, the release said. This month’s survey was conducted from Dec. 5-9.
CURRENT SITUATIONS IMPROVED
US farmers were more optimistic about their current situation and expectations for the future, Mintert said.
The Current Conditions Index jumped 37 points to a reading of 135, while the Future Expectations Index increased 18 points to a reading of 122, the release said.
The rise in current sentiment was motivated by producers’ stronger perception of current financial conditions on their farms and could be attributed to producers taking time to estimate their farms’ 2022 income following the completion of the fall harvest, Mintert said. The Farm Financial Performance Index climbed 18 points to a reading of 109 in December.
Notably, that was the only time in 2022 that the index was above 100, he said. The turnaround was driven by a sharp increase in the percentage of producers who expected better performance than last year, which jumped from 23% to 35% of respondents, and is consistent with the USDA’s forecast for strong net farm income in 2022.
CAPITAL INVESTMENT INDEX CLIMBS
The Farm Capital Investment Index climbed nine points this month to 40, the highest reading since February. Yet, it remains nine points lower than a year earlier, the release said. Among the nearly three-quarters of respondents who said it was a bad time for large investments, the most commonly cited reason was high prices for farm machinery and new construction (41%) followed by rising interest rates (28%).
Despite the improvement in farmers’ perception of their financial situation, the short- and long-term farmland value indices continued to drift lower in December, Mintert said. The short-term index fell five points to 124 while the long-term index declined four points to 140.
When examined over the course of the last year it’s clear that sentiment among producers about farmland values has shifted, he said. Compared with a year ago, the percentage of respondents who expected to see farmland values decline in the upcoming year increased from 6% to 15%, while the percentage expecting to see values rise declined from 59% to 39%.
Among producers who expected farmland values to rise over the next five years, more than three-fourths of them said non-farm investor demand and inflation were the main reasons they expected to see values rise.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $150.00 to $158.11 per cwt, compared with last week’s range of $155.46 to $158.80. FOB dressed steers, and heifers went for $246.54 to $246.67 per cwt, versus $243.77 to $248.27.
The USDA choice cutout Tuesday was up $4.97 per cwt at $286.95 while select was up $3.70 at $254.63. The choice/select spread widened to $32.32 from $31.05 with 78 loads of fabricated product and 40 loads of trimmings and grinds sold into the spot market.
The USDA said basis bids for corn from feeders in the Southern Plains were steady at $1.90 to $2.10 a bushel over the Mar futures and for southwest Kansas were unchanged at $1.00 over Mar, which settled at $6.70 1/2, down $0.08.
The CME Feeder Cattle Index for the seven days ended Monday was $181.02 per cwt down $2.57. This compares with Tuesday’s Jan contract settlement of $182.70, down $1.00.