Farmer sentiment improved modestly over the month of April, according to Purdue University and CME Group’s Ag Economy Barometer. The reading rose 6 points to a reading of 123 — in part due to a more optimistic view of the agricultural economy, the release said.
“Producers held a more optimistic view of the agricultural economy in April,” said James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “A shift in farmers’ expectations regarding the Fed’s future interest rate policy could be a key reason.”
The prime interest rate charged by U.S. commercial banks increased from 7.75% in January to 8% in late March, and since the February barometer survey, there was a noticeable shift in farmers’ interest rate expectations, the release said.
“In April, 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,” the release said. “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. However, the biggest shift was a decline in the percentage of respondents who expect rates to rise between 1% to 2% in the next year, down 6 points since February to 37%.”
Though the Farm Capital Investment Index increased one point in April to a reading of 43, more than 70% surveyed continue to feel now is a bad time to make large investments, with 39% placing concern on rising equipment and construction costs and 33% on rising interest rates.
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