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THE COST OF FARMING<br />
Farmer sentiment improves,<br />
but producers still concerned<br />
about rising costs, inflation<br />
Farmer sentiment improved in August as the Purdue-CME<br />
Group Ag Economy Barometer index rose 14 points above its July<br />
reading to 117. The rise in the overall measure of agricultural<br />
producer sentiment was driven by increases in both the Index<br />
of Current Conditions, which rose 9 points in August to 118 and<br />
the Index of Future Expectations, which climbed 16 points in<br />
August to 116. Producers were less worried about their farm’s<br />
financial situation than in July, although they remain concerned<br />
about a possible cost/price squeeze. When asked about their<br />
biggest concerns for the next year, over half (53%) of respondents<br />
chose higher input costs. Other concerns included rising interest<br />
rates, input availability, and lower output prices chosen by 14,<br />
12 and 11 percent of respondents, respectively. Despite August’s<br />
improvement in sentiment, all three indices remain well below<br />
year ago levels. The Purdue University-CME Group Ag Economy<br />
Barometer sentiment index is calculated each month from 400<br />
U.S. agricultural producers’ responses to a telephone survey.<br />
James Mintert and Michael Langemeier,<br />
Purdue Center for Commercial Agriculture<br />
Prices are softening some, but<br />
should still be decent next year,<br />
Hart said.<br />
Looking forward to 2023<br />
across the categories, farmers are<br />
going to face higher production<br />
costs, particularly in categories<br />
that can move quickly, like fertilizer.<br />
Some will move up more<br />
slowly, like land, seed, machinery<br />
and repair costs.<br />
Interest rates are creeping up,<br />
too.<br />
“You may be 2% higher on<br />
an interest rate than you were a<br />
year ago,” Lasack said. “Higher-priced<br />
fertilizer and input<br />
costs mean you are borrowing<br />
more on an operating line, which<br />
means you are going to pay more<br />
interest, which affects the bottom<br />
line as well.”<br />
Rates in August were just a<br />
little higher than they were at<br />
pre-pandemic levels.<br />
“It’s not terrible, but when<br />
you’re talking input costs that are<br />
twice as much what they were<br />
at that time, that’s real money,”<br />
Lasack said.<br />
One area that will see some<br />
movement will likely be cash<br />
rents, said Greg Bopes, assistant<br />
vice president and assistant trust<br />
officer and farm manager for<br />
Ohnward Bancshares, Inc.<br />
“We didn’t see a lot in that area<br />
in 2022. I would anticipate to see<br />
an increase in 2023 based on land<br />
values,” he said.<br />
The average acre of Iowa farmland<br />
increased nearly 30% last<br />
year, according to the Iowa State<br />
University Land Value Survey,<br />
released late in 2021. Auctions<br />
in Eastern Iowa this year have<br />
been bringing in record prices per<br />
acre, in the $15,000 and above<br />
range.<br />
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