CONCERNS ABOUT COTS AND THE ECONOMY
Between persistent supply chain problems, strikes and the overall decline in the number of available workers in the wake of the pandemic, costs continue to climb as demand for agricultural inputs remains high and supplies are tight.
In addition to the standard survey questions that create the index, DTN asked for some additional thoughts on costs and overall economic conditions.
When asked if they thought their sales and marketing efforts in the 2021-22 sales season would overcome increases in input costs, farmers were not very confident. The survey found that 82% said they were either concerned or very concerned that costs would weigh on profits in 2022.
These concerns appear to be valid, given the input costs that DTN continues to generate. The DTN Retail Fertilizer Index in August returned $ 563 per tonne of potash, $ 755 per tonne of MAP and $ 366 per tonne of UAN. In November, during the current period of investigation, these prices were respectively $ 775, $ 915 and $ 574 per tonne. For more than a decade, DTN has reported retail fertilizer prices – and the UAN price for November 2021 reached a record high for the period.
DTN’s proprietary retail fertilizer data tracks price changes weekly and can be viewed weekly at https://www.dtnpf.com/â¦.
Prices for crop chemicals, equipment parts, tires, diesel fuel and other essential farm inputs have all seen significant increases throughout 2021.
Farmers were also asked to what extent they fear increases in inflation will harm the farm economy. Inflation was announced in October to have hit 6.2%, and economists and policymakers were just starting to debate the longer-term implications of that rate as the latest survey was conducted.
Inflation is a word agriculture hasn’t had to grapple with seriously in decades, but farmers have seemed quick to worry about it. Only 5% of those polled said they were not concerned about inflation. Almost 60% were either “very concerned” or “extremely concerned” about the issue.
For several years, the DTN has questioned the concerns of farmers about obtaining adequate operating loans for the season. Historically, with low interest rates and other factors, concerns about operating loans have been low.
That changed slightly in November. For this most recent survey, 46% of respondents said they were not concerned about getting loans, and an equal amount said they were somewhat worried. In April 2021, nearly 60% of farmers were not worried and 32% had concerns about getting adequate loans. In August, farm bankers surveyed by the Federal Reserve Bank of Kansas City were also optimistic about their farm customers and loan repayments. (See https://www.dtnpf.com/â¦)
MIDWEST LESS OPTIMISTIC
Slicing numbers around region and demographics, the biggest index drops for the latest Farm Confidence Index survey were on Midwestern farmers. Respondents presented an overall index of 108, 56 points below November 2020 and a drop of 18 points since August. Other regions reported drops of 30 to 40 points from a year ago and declines of 20 points from August.
Respondents who identified themselves as primarily crop producers reported an index of 102, 47 points lower than December 2020. Livestock producers had a slightly lower overall index of 91, a decrease of 48 points from 2020 The outlook for the future was similar, with crop producers posting a slightly larger year-over-year decline. Crop producers recorded a future expectations score of 67, down 86 points from a year ago. In comparison, cattle ranchers, while achieving an even lower expectation score of 54, saw a slightly smaller drop of 63 points from 2020.
DTN also breaks down responses by income level, and there have been times, especially when pessimism reigns, where we see more pessimism from farmers with annual incomes below $ 249,000 and in levels income of $ 250,000 to $ 499,000. For November, the index numbers were relatively consistent across income levels.
AGRI-ENTERPRISES ALSO DISPLAY CONCERNS
Higher input prices potentially increase agricultural retailer profits, but that doesn’t show up in overly optimistic numbers for the DTN / The Progressive Farmer Agribusiness Index. During the same period, DTN is conducting the Farmer Survey, asking similar questions of at least 100 agricultural suppliers, elevators, equipment dealers and other businesses targeting farmers and ranchers.
The agri-food index for November was neutral at 98, down 12 points from the level in August and November 2020. The score for the current situation in the food industry is 123, down slightly from August but up 20 points from a year ago, showing some optimism under current conditions.
However, the future expectations score for the agribusiness is slightly pessimistic at 80, down 16 points from August and 31 points from December 2020. As with farmers, agribusiness confidence industry has seen a downward trend throughout 2021.
The next DTN / The Progressive Farmer Agriculture Confidence Index survey will take place in April 2022.
Greg D. Horstmeier can be contacted at [email protected]
Follow him on Twitter @greghorstmeier
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