WEST LAFAYETTE, Ind. – A Purdue University agricultural economist said he’s a little surprised at the amount of pessimism shown by farmers in the university’s latest survey of producer sentiment.

Farmer sentiment, as measured by the Purdue University/CME Group Ag Economy Barometer, fell five points to 112 in September. The monthly survey gauges the health of the U.S. agricultural economy.

The Current Conditions Index dropped nine points to 109, while the Index of Future Expectations dipped three points to 113. A value greater than 100 shows positive sentiment toward the economy. Values lower than 100 indicate negative sentiment. The survey of 400 U.S. producers was conducted Sept. 19-23. The results were released Oct. 4.

Michael Langemeier said the pessimism is surprising considering 2021 was a good net income year and “2022 is shaping up to be a good net income year too, especially for crop producers. What’s dragging down sentiment is all the uncertainty with input costs and interest rates. There are some very big changes occurring.”

Inflation is also influencing producer sentiment, but inflation can have positive and negative impacts on agriculture, he noted. “General inflation tends to increase the cost of inputs. A positive is that land is a good hedge against inflation. Land prices are positively impacted by inflation. Another negative is that inflation puts pressure on interest rates. Farmers borrow to put a crop in the ground and to feed their livestock. To see interest rates going up certainly isn’t a positive.”

Survey respondents said input costs and interest rates will be worries over the next year, said James Mintert, director of Purdue’s Center for Commercial Agriculture. “Concerns about input costs and, in some cases, availability are key factors behind the relative weakness in this month’s farmer sentiment,” he stated. “(It’s) no surprise that 44 percent of them said that higher input costs are their number one concern. But this month we saw more producers choosing rising interest rates as a primary concern, with 23 percent of them choosing that as the number one concern for their farming operations in the upcoming year.”

For 2023, 38 percent of the respondents expect input costs to increase 1 to 9 percent, compared to 2022 prices. Almost a fourth (24 percent) of respondents expect input prices to rise 10 to 19 percent, while 9 percent expect inputs to go up 20 percent or more.

Input costs for corn could rise 5-6 percent next year over this year, which is lower than the 25 percent increase this year over 2021, said Langemeier, also associate director of the center. The numbers are still way above the long run average of 2-3 percent, he added.

Langemeier said he doesn’t expect producer sentiment to move drastically up or down over the coming months. “I don’t see any large spikes in either direction,” he said. “2023 is not going to be as good a net income year as this year, but it’s not going to be a train wreck either. We’re looking at close to break even in a lot of those futures prices. I think the index will be more sideways as long as inflation and interest rates continue.”

He cautioned producers not to delay too much in selling their 2022 crop. “There’s always a risk that you can hold on to crops too long. Holding on past May is pretty risky. There are certainly some opportunities to get some pretty good prices.”

Langemeier said he expects margins to be a little tighter next year.

Producers were also asked about their cover crop usage. Almost six out of 10 (57 percent) said they currently plant cover crops on a portion of their land, while about one out of four said they have never planted cover crops.

Most producers who use cover crops said they only plant them on part of their land. Half indicated they plant on 25 percent or less of their acreage. Nearly a fourth said they use cover crops on more than 50 percent of their land. Thirty seven percent of respondents said they plant cover crops to improve soil health and 33 percent said they plant to improve erosion control.