Ag producers lack confidence in 2023 farm income

Strong harvest-time commodity prices pushed farmer confidence to its highest level in 16 months, said a Purdue University poll of large operators released on Tuesday.

The abrupt 24-point climb in the Ag Economy Barometer “was motivated by producers’ stronger perception of current financial conditions on their farms,” said agricultural economists James Mintert and Michael Langemeier.

While producers said 2022 was a better year financially than 2021, in line with USDA estimates of record-high net farm income in 2022, their euphoria faded when asked about the new year.

“Producers indicated they expect financial performance in 2023 to fall,” wrote Mintert and Langemeier, who oversee the barometer. “Rising costs and narrowing margins are key reasons.”

The barometer, with a current reading of 126, is updated monthly, based on a telephone survey of 400 producers. The latest telephone survey was conducted from December 5-9.

USDA chief economist Seth Meyer said there were uncertainties about 2023, beyond the difficulty of achieving two years in a row of highest-ever income for the sector. “Will we see some moderation in commodity prices? Will there be continued concern about input prices?” said Meyer in a USDA Radio interview.

“Concerns about costs continue to be top of mind for producers when asked to look ahead,” said the Purdue economists. Some 45% of producers said higher input costs were their top concern, followed by rising interest rates, 22%. Half of producers said they expected cash rental rates for farmland to be higher this year than in 2022.

Producers’ assessment of their financial condition was sharply higher in the December survey than it was a month earlier. “The change in perception among producers regarding their farms’ financial situation could be attributable to producers taking time to estimate their farms’ 2022 income following the completion of the fall harvest,” said Mintert and Langemeier.

The current barometer reading was the highest since 138 in August 2021. Purdue says it interviews operators with production worth at least $500,000 a year. USDA data say the largest 7.4% of U.S. farms top $500,000 in annual sales. The survey has a margin of error of plus or minus 5%.