The October Purdue University/CME Group Ag Economy Barometer recorded a drop in producer sentiment, down three points to a reading of 121, said a release by Purdue Agricultural Economist James Mintert.
The modest drop was part of a three-month slide primarily the result of producers’ weakened perceptions for current and future conditions. The Index of Current Conditions was down five points to a reading of 140, while the Index of Future Expectations fell two points to a reading of 114.
The Ag Economy Barometer is calculated each month from 400 US agricultural producers’ responses to a telephone survey. This month’s survey was conducted between Oct. 18-22.
PRESSURED BY MANY ISSUES
Weakness in farmer sentiment appeared to be driven by a wide variety of issues, with concerns about input price rises topping the list, Mintert said. Rapid run-ups in input prices, especially fertilizer, were giving rise to concerns among producers about operating margins.
Livestock producers also were concerned about a cost-price squeeze, especially in the pork and dairy sectors, he said.
Producers’ views of their farm’s financial situation were less optimistic in October compared with September, Mintert said. The Farm Financial Performance Index declined six points to 104 in October.
More than half (51%) of producers in the survey said they expected input prices to rise 8% or more in 2022 and one-third of producers said they expected these prices to rise by 12% or more, he said. While the dramatic rise in fertilizer prices was a key factor, rising input costs also extend to other inputs like seed, pesticides, along with machinery repairs and ownership costs.
Rising input costs were starting to have a dampening effect on expectations for farmland cash rental rates, Mintert said. In October, the percentage of corn and soybean producers expecting higher farmland rental rates in 2022 compared with 2021 dipped to 43%, down seven points from September, with more respondents expecting rates to remain unchanged.
YET PRODUCERS BULLISH ABOUT FARMLAND
Despite those concerns, producers remained bullish on farmland values, he said. The Long-Term Farmland Value Expectations Index set a new record high with a reading of 161, two points higher than a month earlier while the short-term index rose one point to 156.
Tight machinery inventories continued to restrain investment plans. Nearly four out of ten respondents said their intentions were affected by low machinery inventories.
Even so, the Farm Capital Investment Index improved modestly in October, up three points to a reading of 46, but the index still was 50% below the beginning of the year. Weaker construction plans also weighed on the investment index.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $126.08 to $127.34 per cwt, compared with last week’s range of $124.70 to $127.09. FOB dressed steers and heifers went for $195.98 to $197.95 per cwt, versus $195.10 to $196.72.
The USDA choice cutout Tuesday was down $0.20 per cwt at $287.38, while select was up $1.74 at $266.13. The choice/select spread narrowed to $21.25 from $23.19 with 97 loads of fabricated product and 17 loads of trimmings and grinds sold into the spot market.
The USDA reported Tuesday that basis bids for corn from livestock feeding operations in the Southern Plains were unchanged at $1.30 to $1.40 a bushel over the Dec futures and for southwest Kansas were unchanged at $0.40 over Dec, which settled at $5.73 a bushel, down $0.06.
The CME Feeder Cattle Index for the seven days ended Monday was $156.26 per cwt down $0.30. This compares with Tuesday’s Nov contract settlement of $157.57 per cwt, up $3.17.