Farmers Expect Cooling Off Period in Machinery Buying

The Purdue University/CME Group Ag Economy Barometer leveled off after two months of sharp declines, down just three points to a reading of 134 in July.

The Index of Current Conditions was down six points to a reading of 143, primarily as a result of weakened principal crop prices. The Index of Future Expectations was down two points to a reading of 130.

The Farm Capital Investment Index declined for the fourth consecutive month, down four points to a reading of 50.

Weakness in the investment index was primarily attributable to more producers indicating they plan to reduce their farm building and grain bin purchases in the upcoming year. Two-thirds of July’s respondents said their construction plans were lower than a year earlier, compared to 61 percent who indicated that in June.

Plans for farm machinery purchases were also somewhat weaker, with a shift of more respondents planning to reduce their machinery purchases compared to last year instead of holding them constant.

Producers were also asked about their expectations for farm input prices. Fifty-one percent of the producers in the July survey expect input prices to rise 4 percent or more over the next year, 30 percent expect costs to rise 8 percent or more, and 18 percent expect input prices to rise by 12 percent or more.

It is important to note that these expectations are markedly higher than the rate of 1.8 percent per year that input prices have risen over the last decade.

The Ag Economy Barometer is calculated each month from 400 U.S. agricultural producers’ responses to a telephone survey. This month’s survey was conducted July 19 to 23.