Optimism can’t make it rain. Optimism can’t make fertilizer cheaper. But optimism sure can make the day to day more doable. The new monthly Purdue University/CME Group Ag Economy Barometer shows that farmers just added a bit of optimism regarding the values of their land. But they have new concerns as they look ahead to 2024.
First, the slow climb in optimism. Jim Mintert, who grew up on a family farm north of St. Louis, serves as director of Purdue University’s Center for Commercial Agriculture. He says, yes, his national survey of 400 farmers reflected an uptick in a better outlook on current conditions. But he wants to add perspective on the monthly barometer that resulted in a four-point gain of 110 compared to September.
“A slight improvement. Keep in mind, though, that 110 is down from where we were. For example, 2021, we were 121. And go back to 2020, we were probably at 183.”
--Jim Mintert in interview with Brownfield Ag News
Mintert surmises that farmers may be feeling a little better about their outlook after making it through the summer-drought that impacted various parts of the country. And despite that drought, many surpassed yield expectations. And they see additional value in their farmland.
Farmers (corn and bean producers) have adjusted their practices to add more no till, planted more drought-resistant varieties and tried to better manage water, which may have helped make 2023’s productions better than first thought, the monthly barometer’s results showed.
“People who say they expect to see farmland values rise over the next five years continue to point to two key factors,” said Mintert, surveying the results of how farmers responded.
One factor that they cited is the belief that values will continue to increase because of the continued interest of non-farm investors in properties. The other factor is the double-edged sword of borrowing costs. “Non-farm investor demand is the biggest choice (in his survey results) and the follow-up is inflation,” he explained.
Now, let’s get to inflation. With interest rates as high as they have been in nearly 20 years, that does make almost everything more expensive. So, that could impact future farmland purchases.
RELATED: Previous AFO article on how interest rates have changed over the past quarter century.
But thoughts on interest rates also lead to the negative feelings reflected in the Purdue University/CME Group Ag Economy Barometer for October.
This passage from the report demonstrates the concerns that farmers have about rising borrowing costs for the future:
“Despite the perception that financial conditions were stronger than a month earlier, the Farm Capital Investment Index fell 4 points in October to a reading of 35. This was the lowest reading of the year for the investment index. In October, nearly 8 out of 10 (78%) respondents said it was a bad time to make large investments in their farm operation, while just 13% of farmers responding to the October survey said it was a good time to make large investments.”
But interest rates, according to the survey, are only their second biggest concern. They worry most about input costs, which have suffered “extreme volatility” over the past few years, Mintert reminds everyone.
Higher input costs, combined with angst if producers have to borrow money for things like major equipment purchases could add stress to their bottom line in 2024.
Top three concerns for 2024, according to the October barometer:
1. Input costs
2. Interest rates
3. Lower crop and livestock prices