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Farmers say it’s not a good time to make investments in their operations

Seventy-two percent of producers in the latest Ag Economy Barometer say it’s a bad time to make large investments in their farming operation.

Jim Mintert, director of the Purdue University Center for Commercial Agriculture says of the respondents who say it’s not a good time to make investments, “45 percent of the people in the survey said it was because of the increase in prices for farm machinery and new construction.”

Nearly 30 percent of farmers surveyed said rising interest rates were the primary reason for it being a poor time for making largest investments. The percentage of respondents focused on rising interest rates as a key reason has doubled since last July when this question was first included in a barometer survey.

Overall, Mintert says it makes sense sentiment is a little lower.

“If you look at the rise in prices for farm machinery versus consumer inflation, for example, prices for farm machinery have gone up much more rapidly than consumer inflation. I think that comparison is valid and it really probably speaks to why people are saying it’s not a great time,” he says. “But they look at their income and needs for machinery, buildings, and equipment and they’re still willing to make investments.”

But, he says that doesn’t mean farmers won’t make the investments.

“That’s not the same thing as saying they won’t step out and make a purchase. If you look at, for example, in 2020 sales of two-wheel drive tractors in the one hundred horsepower and up category were 18,729 units. In 2021, the industry moved 23,730 units and in 2022 it went up another almost 3,000 to 26,500. People are willing to make investments, but they don’t necessarily feel good about it because there simply aren’t any good deals out there.”

The Farm Capital Investment Index has been trending lower over the past two years. Mintert says the latest capital investment reading is down roughly 50 percent.

The Purdue University/CME Group Ag Economy Barometer is a monthly national survey of 400 U.S. agricultural producers.