Can’t Fool A Farmer
Farmers, like others in the world of agriculture, are always positive. One has to be positive, but realistic in realizing negatives must also be managed.
This past week I was reading two recent farm reports for 2022. The first was the Net Farm Income Forecast and the other was a recent Agriculture Confidence Index Result.
Both were more positive than the 2021 reports, but the farmers were worried about the cost of farming inputs. Input concerns are across the board in agriculture, especially these days. Another concern is future inflation.
The U.S. Department of Agriculture (USDA) Net Farm Income Forecast was quite optimistic. The farm cash receipts are forecast to increase by $64.3 billion to $421.5 billion in 2021. Total crop receipts are forecast to increase by $37.9 billion from 2020 levels to $230.1 billion this year.
As we all realize, this figure reflects the growing demand of corn and soybeans bought by China. The forecast showed when corn and soybeans are combined, the forecast increased by $36.3 billion in 2021, accounting for most of the growth in crop cash receipts. The forecast for animal and animal products is expected to increase by $26.5 billion to $191.5 billion following increases in receipts in hogs, chickens and cattle. The forecast didn’t mention sheep, but with the higher prices of lambs, this forecast should be up, too.
The bad news, as expected, is total production expenses, including operator dwelling expenses, are forecast to increase by $26.1 billion to $383.5 billion. The report said nearly all categories of expenses are forecast to be higher in 2021, with feed, livestock and poultry purchases expected to see the largest dollar increases.
Farm sector equity is expected to increase by 2.9 percent to $2.81 trillion, a decline of 0.7 percent after adjusting for inflation. Let’s face it, inflation and taxes could be huge factors in the near future. Farm sector assets are forecast to increase 2.5 percent following the rise in farm real estate assets, but both are expected to fall when adjusted for inflation.
Farm sector debt is expected to be about the same as in 2020, but inflation will increase debt also. Real estate debt is expected to rise, but non-real estate debt is expected to fall – the first decline since 2012.
The DTN/Progressive Farmer Confidence Index is a survey taken three times each year in early spring before planting, in August ahead of harvesting and in late November, just prior to year-end tax season. In the latest, 500 farmers were surveyed by phone in the first two weeks of August. Index numbers above the baseline of 100 indicate optimism and scores below 100 indicate pessimistic views.
Farmers interviewed in August rated their present situation at 166.3, down 20 points from spring 2021, but up 119.4 from the record low of August 2020. Most farmers predicted their overall income and farm-based income would stay about the same. Forty-six percent of farmers expected input costs would be worse in the coming year with 16 percent projecting lower input costs. Livestock producers turned in an overall index of 124.2. They rated their present condition at 180.9, but their future expectations were only 99.1.
Both farmers and agribusiness managers were more confident about the present, but lower for the future. I would guess politics has something to do with this.
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