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Higher Costs Temper Farmer Optimism

Gregg Hillyer
By  Gregg Hillyer , Progressive Farmer Editor-in-Chief
Rising input costs are cooling growers' outlook for the future. (Jim Patrico)

America's farmers may be focused on harvest 2021, but they had plenty on their minds prior to revving up their combines. According to the most recent DTN/The Progressive Farmer Agriculture Confidence Index (ACI), growers are in a much better state of mind than ahead of the 2020 harvest.

The overall ACI is 116.6, down 7.3 points from spring but up 22.3 points from a year ago. Index numbers above the baseline of 100 indicate optimism -- the higher the number, the higher that optimism. Scores below 100 are considered pessimistic.

The big reason for the decrease since spring appears to be concerns about keeping costs in line with static profits, according to DTN Editor In Chief Greg Horstmeier, who reports on the ACI results.

The index is created by melding responses to how farmers feel about their present situation and what they expect a year from now. Farmers responding to the telephone survey answer financial and income questions that compare those present and future conditions. Five hundred farmers were surveyed the first two weeks of August.

DTN conducts the survey three times a year: in early spring before planting, in August ahead of harvest and in late November just prior to year-end tax season.

Farmers rated their present situation at 166.3, down 20 points from spring 2021 but up a massive 119.4 from the record low of August 2020. Their future expectations score came in at a slightly pessimistic 90, essentially flat from spring but down 30 points from preharvest 2020.

Crop prices are significantly higher this year compared to preharvest 2020. Some of the drop in future optimism could be based on the old adage that nothing cures high crop prices like high crop prices, Horstmeier points out. But, given that China will likely continue to be a key buyer of commodities and the hope that the overall economy will continue to grow despite COVID concerns, the lack of high hopes for the future might lay on the expense side of the farm ledger.

In general, the biggest percentage of farmers surveyed predicted their overall income and farm-based income in the coming year would be similar to current levels. However, some 46% of farmers expected input costs would be worse in the coming year, with only 16% projecting lower input costs.

CROP FARMERS MORE CONCERNED

Livestock producers turned in an overall index of 124.2. They rated their present condition at a very optimistic 180.9, while their future expectations netted only 99.1.

Crop farmers show even more concern. The overall index for farmers saying most of their income came from crop sales was 112, with a current situation score of 161.8. Future expectations were even more pessimistic, at 83.2, which is 32 points below August 2020.

HIGHER INCOME, HIGHER EXPECTATIONS

The preharvest survey showed more variation among farm income level than is normally seen with the ACI, Horstmeier adds. Farmers at the lower two levels of income, from $100,000 to $249,000 and $250,000 to $499,000 in annual income, were basically in the slightly pessimistic 80s across the board. Farmers with $500,000 to $1 million in income posted a present situation of 115.4 but a pessimistic 70 for future expectations. At the most optimistic level were farmers with $1 million-plus income, placing their present condition at 132, with a future expectation of still-optimistic 111.1.

Midwest producers were the most optimistic, with an overall index of 125.7. Southeastern producers were slightly less, at 115.1, with Southwest farmers at a neutral 103.

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-- DTN/PF Agriculture Confidence Index: To see the Reporter's Notebook video about the ACI results, go to https://www.dtnpf.com/…

-- Write Gregg Hillyer, 2204 Lakeshore Dr., Suite 415, Birmingham, AL 35209, or email gregg.hillyer@dtn.com

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