Farmer sentiment towards the agricultural economy took a turn in August. It fell 17 points from 112 in July to 95 in August, according to the latest Purdue University/CME Group Ag Economy Barometer.
The results are based on a monthly survey collected from 400 farmers across the U.S.
This is the largest one month decline in almost a year, according to Purdue economists.
“This was in sharp contrast to July when farmers’ optimism about their future prospects pushed the Ag Economy Barometer up, despite concerns about current economic conditions,” Purdue University economics officials stated in a recent press release.
A rally in spring commodity prices helped push farmer outlooks up in late spring and early summer. But record U.S. Department of Agriculture (USDA) harvest and yield estimates, along with ideal growing conditions for corn and soybeans this summer, have pushed crop prices down significantly.
The USDA August Crop Production Report forecast record soybean and corn harvests this fall, which triggered the lowest corn prices of the last decade.
“Tight operating margins for crop producers are leading to adjustments in production costs. For example, the Purdue crop budgets for rotation corn reported a $47-per-acre reduction in variable costs (seed, fertilizer, herbicide, etc.) from 2015 to 2016,” Purdue officials stated in the press release.
The August Ag Economy Barometer did show somewhat surprising results. Farmers expect input prices to rise in 2017.
The survey indicated 90 percent of farmers anticipate herbicides, insecticides and fungicides to rise in 2017 despite the low commodity prices.
“At current prices, they’re below profitability levels, no question,” Alan Hoskins, president and CEO of American Farm Mortgage Company told Farm Journal. “What we need to do is sit down with our producers, help them if they don’t already understand breakevens. Help them understand so they can work with their marketing people to lock in opportunities because we still have a long way to go in the pricing of this crop.”