Agricultural News
Uncertainty in Today's Economy is the Largest Factor Influencing Low Producer Sentiment
Wed, 12 Oct 2022 19:38:31 CDT
At the 2022 Rural Economic Conference put on by the Oklahoma State University’s Agricultural Economics Department at the ConocoPhillips Alumni Center located on the OSU campus, Senior Farm and Ranch Broadcaster, Ron Hays, got the chance to speak with Dr. Jim Mintert from Purdue University about the Ag Economy Barometer project he started in 2015 aimed at providing a tool for producers, economists, traders, finance industry professionals and journalists who are interested in understanding the agriculture industry and the broader global economy.
The Purdue University/CME Group Ag Economy Barometer is a nationwide measure of the health of the U.S. agricultural economy. On the first Tuesday of each month, the Ag Economy Barometer provides a sense of the agricultural economy’s health with an index value. The index is based on a survey of 400 agricultural producers on economic sentiment each month. Quarterly, the index is accompanied by an in-depth survey of 100 agriculture and agribusiness thought leaders.
“We had an opportunity back in 2015 to launch a project and partnership with the CME (Purdue University’s Center for Commercial Agriculture) group to create an index called the Ag Economy Barometer,” Mintert said. “It is a sentiment index for U.S. agricultural producers. It really mirrors what has been done for decades with the survey of consumers that has been done by the University of Michigan.”
The Ag Economy Barometer, Mintert said, specifically looks at production agriculture.
“We talk to people that produce the primary ag commodities on the crop side- corn, wheat, soybeans, and cotton,” Mintert said. “On the livestock side, we talk to people that produce beef, pork, and dairy producers.”
By specifying the target groups to survey, Mintert said the Ag Economy Barometer is able to focus on the major food groups and production outlets that are fueled by producers who grow about 80 percent of the nation’s food.
“We have identified people that have an estimated gross farm income of 500,000 dollars and up because we want to talk to people who are engaged in agriculture as maybe not the single source of their farm’s income, but a major source of their farm’s income,” Mintert said. “So, these are people that are engaged from a business management standpoint.”
The Ag Economy Barometer is a telephone survey, Mintert said, and the goal is to not keep individuals on the phone for over five minutes.
“A typical survey for us usually has somewhere between 20 and 30 questions on it depending on some of the flow charts that go with it in terms of who is asking or who is responding to what,” Mintert said. “One of our questions we get a lot of interest in is, ‘is now a good time or a bad time to make large investments in your farming operation in things like machinery, equipment, and buildings,” and we have had to ask follow-up questions to that to maybe better understand and explain why people are answering that the way they are, because over the last year and a half, people have increasingly told us that it is not a good time to make large investments, yet we look at farm machinery sales, used farm machinery sales, and those continue to be pretty strong.”
Mintert said people are saying that now is not a great time to buy, because it is expensive to do so.
“Prices on machinery have gone up very rapidly to levels that we are not very comfortable with,” Mintert said. “That doesn’t mean we won’t buy, but do we feel like we are getting a good deal? No. Therefore it is not a good time to make investments.”
Mintert said producers are asked some of the same questions each month, but some are different. These questions are formulated based on a number of things, he said, including the current economic situation and what questions were asked at the same time in the previous year.
“The number one concern people are telling us is in input prices,” Mintert said. “They are very worried about input prices and secondly, they are also worried about input availability. That was probably a little bit of a surprise to us, but that is still as big of an issue for producers today as it was earlier in the pandemic.”
In a most recent survey, Mintert said around 15 percent of the producers in the survey said one of their top concerns for the 2023 crop season was input availability.
“Very interesting with respect to all of the volatility we have got out there and all the uncertainty,” Mintert said.
The uncertainty aspect, Mintert said, is why the sentiment among producers is so weak today.
“I look at it from the standpoint of, producers are looking at very elevated production costs right now, and based on current budget projections, for example, in the crops, looks like we should be profitable,” Mintert said. “But the risk level has increased, they have got this big investment going into the ground, and the question is, can you guarantee me that I am going to have the opportunity to sell wheat, corn, soybeans, milo, at profitable prices when I harvest that?”
To visit the Ag Economy Barometer and access it’s available resources, click here.
Click the LISTEN BAR below to listen to Ron’s full conversation with Dr. Jim Mintert on factors influencing producer sentiment and the Ag Economy Barometer.
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