Ag Economy Barometer

Farmer sentiment improves; less pessimism over interest rates

Farmer sentiment improved modestly in April as the Purdue University-CME Group Ag Economy Barometer reversed a two-month decline up 6 points to a reading of 123. Both the Index of Current Conditions and the Index of Future Expectations improved in April with the biggest rise taking place in future expectations. The Current Conditions Index rose 3 points to 129 while the Index of Future Expectations rose 7 points to 120. When asked to look ahead one year, more producers said they expect to be better off financially than now with fewer respondents expecting conditions to worsen compared to both a month earlier and one year earlier. This month’s survey was conducted from April 10-14, 2023.

The Farm Financial Performance Index rose 7 points in April to 93, matching the index’s January reading. The prime interest rate charged by U.S. commercial banks increased from 7.75% in January to 8% in late March and a shift in farmers’ expectations regarding future Federal Reserve Board interest rate policy could be one reason the financial performance index improved this month. Compared to earlier in the year, fewer producers expect interest rates to rise over the next year and more producers think rates are likely to hold steady or even decline. This month 34% of respondents said they expect the U.S. prime interest rate to remain unchanged or decline over the next year compared to 25% of producers who felt that way in February. At the same time, two-thirds (66%) of producers expect interest rates to keep rising, compared to 75% of respondents who felt that way in February. The biggest shift was among respondents expecting rates to rise 1 to 2% in the next year which declined to 37% of respondents in April vs. 43% of respondents in February.

About the Purdue University Center for Commercial Agriculture

The Center for Commercial Agriculture was founded in 2011 to provide professional development and educational programs for farmers. Housed within Purdue University’s Department of Agricultural Economics, the center’s faculty and staff develop and execute research and educational programs that address the different needs of managing in today’s business environment.