Ag Economy: Farmers’ Optimism Tempering as Harvest Approaches – DTN

Photo: Michigan State University

U.S. farmers’ optimism is tempering as fall harvest approaches, though according to the latest DTN/The Progressive Farmer Agriculture Confidence Index, they are in a much better state of mind than ahead of the 2020 harvest.

The overall Agriculture Confidence Index is 116.6, down 7.3 points from spring but up 22.3 points from a year ago.

(To see the Reporter’s Notebook video about the ACI results, go here.)

The big reason for the decrease since spring appears to be concerns about keeping costs in line with static profits.

The DTN/The Progressive Farmer 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 a series of financial and income questions that compares those present and future conditions. This summer, 500 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.

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

Farmers interviewed this summer 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 pre-harvest 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.

But given that all indications are China will continue to be a key buyer of commodities, and the hope that the overall economy will continue to grow as COVID-19 numbers yet again peak and fade, 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.

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While the Agriculture Confidence Index survey does not ask about the availability of input supplies, DTN has also been reporting that access to equipment repair parts and some crop chemicals has been an issue during the 2021 season. Supplies are expected to continue to be tight through harvest and into 2022, which both typically increases costs as well as adding to the pessimism about future conditions.

For the latest on the machinery parts supply situation, see our article here.

DTN’s proprietary retail fertilizer data has been showing continued price increases for several months. The latest reporting on these issues can be found here and here.

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 current survey showed more variation among farm income level than is normally seen with the Agriculture Confidence Index. 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.

Employment data released in early August showed nonfarm payrolls rising 943,000 workers, similar to the increase in June. The unemployment rate declined 0.5 percentage point to 5.4% in late July, as well, while concerns over the COVID delta variant — which grows by the day — were just beginning to take hold in some areas of the country, particularly in high-population or tourist areas with low vaccination rates.

The national Consumer Confidence Index for July, the latest numbers, also showed an increase, 129.1 versus the 128.9 for June. That was the sixth month of increases for that index, and a surprise to many economists, according to a Bloomberg survey ahead of that index’s release.

INTERNET, COVID REMAIN ISSUE FOR SOME

Along with questions about their farm situation, survey respondents were also asked about internet access and COVID-19 concerns.

Asked about whether internet access was adequate for the farm and family needs, some 43% said it was. Another 30% rated internet access as usually adequate, but sometimes below needs; 9% said internet rarely meets their needs, while 18% said they did not have reliable internet access.

The greatest concerns about COVID-19 were around its effect on the overall U.S. economy (34%), with concerns about family health second (28%). Still, more than a quarter, 26%, said they had little or no concerns regarding COVID-19.

AGRIBUSINESS INDEX RESULTS

In addition to talking with farmers, DTN also surveys at least 100 agribusiness leaders to create the DTN/Progressive Farmer Agribusiness Index.

Overall, the mood of agribusiness leaders was lower, with an overall index of 109.6, down 13.4 points from spring and 11.7 below a year ago. As with farmers, agribusiness managers were more confident about current times. The present situation score was 128.1, 3.6 points from spring and 29.8 above 2020 levels.

But their future expectations score dipped 25.3 points to a slightly pessimistic 96.2, down 25 points from spring and about flat with 2020 levels. That future score was the lowest since August 2018. In general, the responses to survey questions showed agribusiness leaders seemed to be expecting a relatively flat sales season in 2022, so it was a lack of growth, rather than any complete downturns, that drove slight pessimism.

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

Follow him on Twitter @greghorstmeier

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