Farmer sentiment improved in August as the Purdue-CME Group Ag Economy Barometer index rose 14 points above its July reading to 117. The rise in the overall measure of agricultural producer sentiment was driven by increases in both the Index of Current Conditions, which rose 9 points in August to 118 and the Index of Future Expectations, which climbed 16 points in August to 116.

Producers this month were less worried about their farm’s financial situation than in July, although they remain concerned about a possible cost/price squeeze. When asked about their biggest concerns for the next year, over half (53%) of respondents chose higher input costs. Other concerns included rising interest rates, input availability, and lower output prices chosen by 14, 12 and 11 percent of respondents, respectively. Despite this month’s improvement in sentiment, all three indices remain well below year ago levels. 

The Farm Financial Performance Index rose in August to 99, 11 points higher than a month earlier and 18 points higher than in May when the index was at its low point. Among respondents, there was a noticeable shift this month from producers expecting worse to better financial performance for their farms in 2022. Both corn and soybean prices rallied from their July lows into mid-August which, along with expectations for good yields, helped explain some of the improvement in financial performance expectations.

Unlike last month, the improvement in expected financial performance this year carried over into expectations for next year as well. The percentage of producers expecting their farm to be better off financially a year from now rose while those expecting their farm to be worse off declined. Respondents were also a bit more optimistic about the U.S. agricultural economy as a whole in the upcoming year as the percentage expecting bad times for U.S. agriculture declined while those expecting good times rose.

There was a small improvement in the Farm Capital Investment Index in August as the index rose 3 points to a reading of 39. However, August was the sixth month in a row that the index remained below 40 indicating producers still view this as a relatively poor time to make large farm machinery and building investments.

In a follow-up question posed in both the July and August surveys, respondents indicated the number one reason for thinking now is a bad time for these major capital expenditures is the increase in prices that’s taken place. This month nearly half (49%) of farmers in our survey chose an increase in prices as their primary reason for viewing now as a bad time for making large investments. Despite the negative sentiment expressed about this being a bad time for large investments, the percentage of producers who say they plan to reduce their farm machinery purchases has been declining since spring.

In March, 62% of respondents said their farm machinery purchases in the upcoming year would be lower than a year earlier. This month that percentage fell to 49%, the first time it’s been less than 50% since last December. Plans for farm building purchases also improved somewhat as well with responses shifting from the reduce to about the same categories.

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