Olga Kostrova /iStock via Getty Images
U.S. farmers’ outlook for inflation has moderated amid little changes to economic sentiment, according to the latest Purdue University/CME Group Ag Economy Barometer.
The barometer fell by one point from a month earlier to 114 in December. Two parts of the barometer, the Index of Current Conditions and the Index of Future Expectations, reflected this decline, settling one point below their respective November figures at 112 and 115.
Inflation expectations moderated, with 70% of respondents saying they estimated inflation to be less than 4% in 2024. Last year at this time, 50% of the producers anticipated an inflation rate of 6% or more. As for borrowing costs, 34% of farmers said they anticipate interest rates will fall in 2024, while 22% expect no change.
Farmers reported another gain in financial performance in December. The Farm Financial Performance Index rose by 2 points from the previous month, extending a positive trend. Since late summer, the index has climbed 11 points. By December, it was 21 points above the low point in May, according to Purdue University/CME Group.
“The shift in farmers’ perception of financial performance during the fall quarter corresponds with USDA’s (U.S. Department of Agriculture’s) more optimistic 2023 farm income outlook released in late November, which was $10 billion higher than their previous forecast,” James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture, said in a statement.
The Farm Capital Investment Index rose by one point from a month earlier to 43 in December. For the year, the index rose 13 points.
Respondents who agreed that now is a favorable time for substantial investments in their farm operation cited “higher dealer inventories” and “strong cash flows” as key factors supporting this perspective, according to the report.
The percentage of respondents selecting “strong cash flows” as a rationale for investment rebounded from the previous month, remained less popular than in July and August. Conversely, in December, the percentage of producers citing “higher dealer inventories” as a primary motivation for investment was more than double the portion who expressed a similar sentiment in July, according to Purdue University/CME Group.