Following a sharp increase in farmer sentiment to close out 2022, the Purdue University/CME Group Ag Economy Barometer had only a modest increase in January, up 4 points to a reading of 130, said Purdue University Agricultural Economist James Mintert, in a 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 January 16-20.
EXPECTATIONS RISE
The rise in sentiment was attributable primarily to better expectations for the future as the Future Expectations Index improved by 5 points to 127, Mintert said. The Index of Current Conditions rose only 1 point to a reading of 136.
Although producers were a bit more optimistic about the future this month, they repeated expectations for tighter margins in 2023 than in 2022, the release said.
The Farm Capital Investment Index was up 2 points this month to 42, Mintert said. However, this still left it 7% lower than a year earlier. Just over 7 out of 10 survey respondents said they thought now was a bad time to make large investments in their farm operation.
Among respondents who felt now was a bad time, 39% said high prices for machinery and new construction, 25% said rising interest rates and 12% said uncertainty about farm profitability was the primary reason, he said.
Interest rates were becoming a bigger concern for farmers, the release said. As recently as November, just 19% of farmers in the monthly barometer survey chose rising interest rates as a key factor affecting their perspective on investments.
OPERATING LOAN EXPECTATIONS DOWN
Each January, the survey has included a question asking respondents if they expected to have a larger operating loan than the previous year and, if so, the reason.
In January, 22% of respondents said they expected a larger 2023 farm operating loan compared to 2022, down from 27% last year, Mintert said. Among respondents who expect a larger operating loan, 80% indicated it was because of increased input costs, while 5% said it was from carrying over unpaid operating debt.
The percentage of respondents who attributed their need for a larger loan to unpaid operating debt has fallen sharply since the question was first posed in January 2020, he said. At that time, just over one-third of producers who anticipated needing a larger loan said it was because of unpaid operating debt. The percentage fell to 20% in 2021, to 13% in 2022, before declining again to just 5% in 2023, the report said. The sharp decline supports ideas that the majority of producers entered 2023 in a strong financial position despite higher production costs.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $158.61 to $159.46 per cwt, compared with last week’s range of $155.57 to $157.50. FOB dressed steers, and heifers went for $249.21 to $250.60 per cwt, versus $244.42 to $249.79.
The USDA choice cutout Tuesday was up $0.15 per cwt at $266.72 while select was up $3.61 at $257.33. The choice/select spread narrowed to $9.39 from $12.85 with 82 loads of fabricated product and 25 loads of trimmings and grinds sold into the spot market.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.57 to $1.70 a bushel over the Mar corn contract. Bids in Kansas were steady at $0.75 over Mar, which settled at $6.74 a bushel, down $0.05.
No live cattle contracts were tendered for delivery Tuesday.
The CME Feeder Cattle Index for the seven days ended Monday was $182.23 per cwt, up $0.94. This compares with Tuesday’s Mar contract settlement of $187.20 per cwt, down $0.50.