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High production costs remain the top concern amongst farmers around the U.S. That’s according to the latest Purdue/CME Group Ag Economy Barometer.
“In January, 42% of the people surveyed said that was one of their biggest concerns. This month it was 32%,” says Jim Mintert, director of the Purdue Center for Commercial Agriculture. “So, not as many people choosing that now as back in January, and I think that’s probably reflective of the fact that, in particular, fertilizer values have weakened but other costs have not.”
25% of those surveyed said rising interest rates are their top concern. Chad Fiechter, associate professor of ag economics at Purdue, joins Mintert on their Purdue Commercial AgCast. They explain this is why 75% of farmers surveyed say now is a bad time for large investments.
“If the companies aren’t going to subsidize our rates, if they don’t want you to be buying that combine, trying to encourage you with their financing deals, I mean, we’re getting into probably that 8%, 9%, 10% range,” says Fiechter. “Which is a lot of money when you’re looking at the expense of the machines today.”
Mintert adds, “With prime in that mid eight, eight and a half percent range, you’re probably looking at operating loans for most folks at 9.5% to 10% depending on the situation. Some folks have been able to borrow money at prime, but a lot of a lot of ag loans are at a premium to prime. So, operating loans, machinery loans, if they’re not being subsidized, those are pretty big numbers.”
And in third place of top concerns amongst farmers, lower crop and/or livestock prices.
“Back in January 16% of the people were choosing that as a big concern,” says Mintert. “This month it was 22%.”
And that’s understandable. USDA NASS released August data for Indiana agricultural prices this week. Corn was down $1.51 from last year, soybeans decreased $.60 from a year ago, wheat fell $1.48, and milk is over $5 lower than last year.