Farmer economic outlook improves

The latest reading of the Purdue University/CME Group Ag Economy Barometer shows farmer sentiment improved modestly last month as they appear more optimistic that interest rates could level off, or even decline in the year ahead. The monthly gauge of producer’s economic outlook rose six points to a reading of 123.

Economists with the Purdue Center for Commercial Agriculture, which conducts the national survey, say both of the barometer’s sub-indices also improved. The Current Conditions Index climbed three points and the Future Expectations Index improved by seven points.

“A shift in farmers’ expectations regarding the Fed’s future interest rate policy could be a key reason behind the improvement in farmer sentiment,” said Jim Mintert, center director and professor in Purdue’s Department of Agricultural Economics. “More producers expect prime interest rates to either hold steady or possibly decline during the next 12 months than felt that way earlier in the year.”

While there was a slight improvement in farmers’ overall economic outlook, they are still hesitant to make large investments in their farming operations. The Farm Capital Investment Index ticked higher by one point last month, but it’s down 32 points from two years ago.

“Among the over 70% of respondents who continue to think it’s a bad time for large investments, the top two reasons cited continue to be the increase in prices for machinery and construction and rising interest rates,” said Mintert.

In a reversal from last month’s survey, Mintert says more respondents chose rising equipment and construction costs than rising interest rates as a top reason for this being a poor time for large investments.

Click here to view the report.