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High Expenses Curb Farmer Optimism

Gregg Hillyer
By  Gregg Hillyer , Progressive Farmer Editor-in-Chief
(DTN/Progressive Farmer)

Nat King Cole liked to sing about "Those Lazy, Hazy, Crazy Days of Summer." But, I'd wager a lot of farmers and ranchers are thinking more along Creedence Clearwater Revival's "Feelin' Blue."

Heading into the 2022 planting season, many were certainly feeling a bit gloomy despite bullish commodity prices. Results from the recent DTN/The Progressive Farmer Agriculture Confidence Index showed more than 33% of farmers expected their net farm income to be worse in the coming 12 months, 21% expected better income and 45% anticipated incomes to be similar by 2023.

The Ag Confidence Index is conducted three times a year, summarizing results collected from telephone surveys of 500 farmers and ranchers. They are asked questions about their current economic and financial conditions compared to a year ago, and what their expectations will be a year from now. An overall index score is created by combining "present condition" and "future expectations" scores. The higher the score, the higher the optimism, with 100 as the baseline. Scores below 100 indicate pessimism.

DTN Editor-in-Chief Greg Horstmeier, who reports on the Ag Confidence Index, points out the latest survey, conducted in late March and April, showed a slightly optimistic 105.8, up from 98.5 in December but down 17 points from spring 2021. Present-situation score, while still positive, was down considerably to 127.9 versus 169.8 at the end of 2021 and 186.2 a year ago. Future expectations were still pessimistic but improving, up from the end of 2021 -- 94.2 versus 60.1 in December 2021 and relatively flat with 90.5 a year ago.

Despite robust commodity prices, farmers surveyed have their eye on expenses. More than 60% surveyed said prices paid for crop and livestock inputs were worse than normal, with 21% reporting normal prices, Horstmeier explains. In addition, when asked what their major concerns for the upcoming season were, high input costs were No. 1 on farmers' lists (51%), followed by drought conditions (27%) and the war in Ukraine (14%).

Regionally, the drought-stricken Southwest has significantly lower scores, Horstmeier points out. The overall index for the region is a pessimistic 77.4, with a present score of 84.3 and future expectations dipping even lower to 74.6.

That compares to an index of 105.2 in the Southeast and 117 in the Midwest. Farmers in the Midwest gave their present situation a score of 131.3, likely the result of continued bullish corn and soybean prices. Recent cash bids for corn at some locations hit $8 per bushel and more than $16 per bushel for soybeans. Even if few farmers had 2021 crop to sell at these high prices, the prospect apparently buoyed their outlook despite continued worries about rising input costs and other farm expenses, higher inflation, the Russia-Ukraine war, and parts and farm machinery shortages, Horstmeier explains.

During the summer months, farmers and ranchers will be closely monitoring their financial spreadsheets and business outlooks. Their economic health entering harvest will no doubt influence the next Ag Confidence Index, scheduled to be conducted in August.

Two expenses that will top farmers' watch list are:

-- DIESEL. Rising fuel bills aren't going away. High demand, tight supplies, lower U.S. refining capacity and the war in Ukraine will keep prices high. Nationally, diesel inventory is 20 to 25% below the three-year average, DTN editor and energy analyst Brian Milne says.

-- FERTILIZER. As of mid-May, some average retail fertilizer prices (per ton) tracked by DTN were at all-time highs: DAP, $1,059; MAP, $1,083; UAN28, $634; and UAN32, $730.

Strong commodity prices are forecast to offset some of these higher costs. But, shrinking balance sheets certainly will change tempered optimism to growing pessimism.


-- See a video discussion of the DTN/The Progressive Farmer Agriculture Confidence Index: https://www.dtnpf.com/…

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


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