Rising operating costs is dragging down farmer sentiment about economic conditions.
The Purdue University/CME Group Ag Economy Barometer recorded a drop in producer sentiment in October, down 3 points to 121. The drop was part of a three-month slide for the index primarily due to producers' weakened perceptions for both current and future conditions in the production agriculture sector.
The Index of Current Conditions was down 5 points to 140, while the Index of Future Expectations fell 2 points to 114.
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 between Oct. 18 and 22.
Recent weakness in farmer sentiment appears to be driven by a wide variety of issues, with concerns about input price rises topping the list, Purdue researchers said. Rapid run-ups in input prices, especially fertilizer for crop production, are giving rise to concerns among producers about their operating margins weakening.
Livestock producers are also concerned about a cost-price squeeze, especially in the pork and dairy sectors.
Tight machinery inventories continue to hold back producers' machinery investment plans, nearly four out of ten respondents said their purchase intentions were impacted by low farm machinery inventory levels. The Farm Capital Investment Index improved modestly in October, up 3 points to 46, but even with that rise the index was still 50% lower than it was at the beginning of the year.
Weaker construction plans among producers for October also weighed on the investment index as the percentage of producers planning to increase building and grain bin construction on their farms fell to 10% in October compared to 13% in September.
The full Ag Economy Barometer for October is available online.
