Expectation for Higher Input Costs Drives Producer Pessimism

WEST LAFAYETTE, IN – Nationwide, producers are expecting input costs to rise at a rate of 8 percent or more in the upcoming year, which would be more than four times the average rise over the last 10 years (1.8 percent). According to the latest Purdue University/CME Group Ag Economy Barometer, this is contributing to a second month of sharp declines in the monthly survey of farmers and ranchers.

Dr. Jim Mintert is Director of the Center for Commercial Agriculture at Purdue and explains that the reading of 137 (down 21 points from May) shows that producers were less optimistic about both current conditions on their farming operations as well as their expectations for the future. Since peaking in April, producers’ view of their farms’ financial performance has fallen sharply. In addition, rapidly rising production costs related to both consumer and farm input price inflation are a concern for agricultural producers.

Also, a decline in the investment index appears to be driven more by plans to hold back on constructing new farm buildings and grain bins than purchasing farm machinery. In June, 61 percent of producers said they reduced plans for new construction, while 9 percent were increasing plans. In comparison, 44 percent of producers indicated they plan to reduce their machinery purchases, 45 percent plan to hold purchases constant, while 10 percent plan to increase purchases, all compared to a year ago.
(SOURCE: All Ag News)