Agriculture Confidence Index Results

COLUMBIA, Mo. (DTN) -- U.S. farmers show concern about the future as the costs of the things they buy and the uncertainty of the wider economy take some of the shine off current commodity prices.

That was the common thread from the latest DTN/The Progressive Farmer Agriculture Confidence Index survey, conducted in mid and late November.

The current Agriculture Confidence Index is 99. While regarded as neutral, that index number is down 18 points from pre-harvest levels and down 47 points from optimism of November 2020. Farmers specifically voiced concerns about input costs and inflation in a series of questions that were added to the typical DTN/The Progressive Farmer Agriculture Confidence Index survey.

The Agriculture Confidence Index is created by melding responses from at least 500 farmers who rate how they feel about their present financial situation and about their expectations of revenue and profits a year from now. Farmers responding to the telephone survey answer a series of financial and income questions that compares those present and future conditions.

Index numbers above the baseline score of 100 indicate optimism -- the higher the number, the higher that optimism. Scores below 100 are considered pessimistic.

DTN has conducted the survey three times a year since 2010. Calls are made in early spring before planting, in August ahead of fall harvest, and in November, just prior to year-end tax season.

HAPPY, BUT CONCERNED

Farmers are optimistic about the present. Questions asking how they feel about current revenue, profits and overall financial condition revealed a present situation score of 170, essentially flat from the 166 in August, and down a mere 8 points from December 2020.

It is farmers' thoughts about the future that brought the overall Index down to a more neutral level from the optimism seen earlier in the year. When asked how they feel they will be fairing a year from now, farmers' answers produced a pessimistic score of 60, a record-low score. It is a drop of 30 points from the neutral 90 of just before harvest and down some 69 points from a year ago.

Farmers have been neutral to pessimistic about the future in all three 2021 surveys, dropping from scores in the 90s for April and August to the 60 currently.

CONCERNS OVER COSTS AND THE ECONOMY

Between continued supply chain issues, labor strikes, and the overall drop in available workers following the pandemic, costs continue to climb as demand for ag inputs remains high and supplies are tight.

In addition to the standard survey questions that create the Index, DTN asked for some additional thoughts around costs and overall economic conditions.

When asked whether they thought their sales and marketing efforts in the 2021-22 sales season would overcome increases in input costs, farmers weren't very confident. The survey found 82% said they were either concerned or very concerned that costs would eat into profits in 2022.

Those concerns seem well-founded, given the input costs DTN continues to report. The DTN Retail Fertilizer Index in August was reporting $563 per ton potash, $755 per ton MAP and $366 per ton UAN. By November, during the time of the current survey, those prices were $775, $915 and $574 per ton, respectively. For more than a decade, DTN has been reporting retail fertilizer prices -- and the 2021 November UAN price was a record high for the period.

DTN's proprietary retail fertilizer data tracks the price changes weekly and can be found weekly at https://www.dtnpf.com/….

Prices for crop chemicals, equipment parts, tires, diesel fuel and other critical farm inputs have all seen significant increases throughout 2021.

Farmers were also asked how concerned they were that inflation increases would hurt the farm economy. It was announced in October that inflation had hit 6.2%, and economists and policymakers had just begun to debate the longer-term implications of that rate as the latest survey was being conducted.

Inflation is a word agriculture hasn't had to seriously contend with for decades, but farmers seemed quick to worry about it. Only 5% of those surveyed said they were not concerned about inflation. Nearly 60% were either "very concerned" or "extremely concerned" about the issue.

For several years, DTN has been asking about farmers' concerns at securing adequate operating loans for the season. Historically, with low interest rates and other factors, concerns about operating loans have been low.

That changed slightly in November. For this most recent survey, 46% of respondents said they were not concerned about getting loans, and an equal amount said they were somewhat concerned. In April 2021, nearly 60% of farmers were not concerned, and 32% had some concern about obtaining adequate loans. In August, ag bankers who were surveyed by the Federal Reserve Bank of Kansas City also showed optimism about their farm clients and loan repayments. (See https://www.dtnpf.com/…)

MIDWEST LEAST OPTIMISTIC

Slicing the numbers around region and demographics, the largest index drops for the latest Agriculture Confidence Index survey were by farmers in the Midwest. Respondents there turned in an overall index of 108, 56 points below November 2020 and a drop of 18 points since August. Other regions reported drops of 30 to 40 points from a year ago and mid-20-point drops from August.

Respondents who identified as mostly crop producers reported an index rating of 102, 47 points below December 2020. Livestock producers had a slightly lower overall index of 91, a drop from 2020 of 48 points. The outlook for the future was similar, with crop producers having a slightly larger drop year-over-year. Crop producers recorded a future expectations score of 67, down 86 points from a year ago. By comparison, livestock producers, while turning in an even lower expectations score of 54, had a slightly smaller drop of 63 points from 2020.

DTN also breaks out responses by income levels, and there have been periods, especially when pessimism reigns, where we see more pessimism from farmers with annual incomes of below $249,000 and in the $250,000-$499,000 income levels. For November, the Index numbers were relatively consistent across income levels.

AGRIBUSINESSES ALSO SHOW CONCERNS

Higher input prices do potentially add profits to ag retailers, but that's not showing up in overly optimistic numbers for the DTN/The Progressive Farmer Agribusiness Index. During the same period DTN conducts the farmer survey, it asks similar questions of at least 100 farm suppliers, elevators, equipment dealers and other businesses targeting farmers and ranchers.

The Agribusiness Index for November was a neutral 98, down 12 points both from August and from the November 2020 level. The agribusiness present situation score is 123, down slightly from August but up 20 points from a year ago, showing some optimism at present conditions.

However, the agribusiness future expectations score came in at a slightly pessimistic 80, down 16 points from August and down 31 from December 2020. As with farmers, agribusiness confidence has been on a downtrend throughout 2021.

The next DTN/The Progressive Farmer Agriculture Confidence Index survey will take place in April 2022.

Greg D. Horstmeier can be reached at greg.horstmeier@dtn.com

Follow him on Twitter @greghorstmeier

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