FARM OUTLOOK 2023 Compiled by Suz Trusty
Perhaps the most accurate one-word descriptor for 2022 is unexpected. From weather conditions to economic interactions, “normal patterns” didn’t apply. Yet, you persevered through it all, proving again, as John Connell said, “To be a farmer is to be a student forever, for each day brings something new.” Tis outlook, compiled from multiple agricultural experts’ predictions, highlights many issues that could impact your operations in 2023.
Annual Ag Outlook
Te University of Purdue’s Agricultural Economics Report’s annual outlook issue identifies key factors that may affect the agricultural economy in the coming year. Tat report was issued on January 10, 2023. After a year of economic shocks that included supply chain disruption, global conflict, tight margins, and historic inflation, “Signs are pointing to another uncertain and volatile year in agriculture,” said Roman Keeney, associate professor and co-editor of the report. “In 2023, our experts are assessing the possibility of a recession, impacts from the ongoing war between Russia and Ukraine, as well as expectations for input costs and food prices. Additionally, the 2018 Farm Bill is set to expire in September, which makes 2023 an important year for farm policy. Following multiple years of emergency support and agriculture benefitting from Covid relief packages, government direct support to agriculture is set to fall dramatically.” Te report addresses the implications of these challenging issues on the ag sector. To read the full 2023 outlook issue, visit
https://purdue.ag/paer.
Te following excerpts are especially relevant for sod producers. Larry DeBoer considers the possibility of recession in 2023, noting the unusual match between negative growth and declining unemployment. He indicates this and other factors may make any recession shallow—and may produce enough conflicting indicators to never be tagged as an official recession under traditional rubrics of classification.
In agricultural trade, Russell Hillberry offers insight on the many factors that have contributed to increased volatility. Foremost among these is the war between Russia and Ukraine and the global market disruptions that have followed from that conflict. He notes that sanctions on Russia (and Belarus) are expected to remain in place beyond 2023, leaving persistent effects from this conflict even if it is halted in the coming year.
Looking ahead to the 2023 crop year, Michael Langemeier provides updates from the Center for Commercial Agriculture’s Crop Cost and Returns Guide pegged to December estimates. Data indicates that input costs will likely be similar to the high levels of 2022—which for
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fertilizer and land rents were above recent peak levels seen in 2013 and 2014. Tese continued high costs will keep profit margins tight in spite of high commodity prices—with the expected gross revenue from an acre of corn unable to fully cover land rents and other market rate returns to resources allocated to production.
Brady Brewer and Todd Kuethe review the past year in finance when the Federal Reserve ratcheted interest rates upward on seven consecutive occasions. Tis has resulted in a sharp turn against long running trends of average interest rates for agricultural loans. Increasing rates dampened demand for operating loans while increased fertilizer prices spurred more borrowing. Tese competing factors continue to set the pace of borrowing. Te authors address the supply side of funds, flagging that as an item to watch in the coming year.
Todd Kuethe looks ahead to land markets for the coming year. Each summer the Purdue Ag Econ Report devotes an issue to land values—including reporting on the most recently collected data from Indiana surveys on land markets. For this interim report, he reviews other survey reports and indicators that might provide signals for the coming year and to put data from Indiana’s summer survey in context with regional findings and trends. Taking into account a number of factors, Kuethe expects land rents to increase but at lower levels than the record increase seen in 2022.
Ag Economy Barometer Rises
As reported in early February 2023, farmer sentiment had a modest increase in January, following a sharp increase to close out 2022, as the Purdue University/CME Group Ag Economy Barometer rose four points to a reading of 130. Te rise in sentiment was primarily attributable to better expectations for the future, as the Future Expectations Index improved by five points to 127. Te Index of Current Conditions rose only one point to a reading of 136. Te Ag Economy Barometer is calculated each month from 400 U.S. agricultural producers’ responses to a telephone survey. Te February data reflects the survey conducted January 16-20, 2023. Review the full Ag Economy Barometer at the link that follows.
https://ag.purdue.edu/commercialag/ ageconomybarometer/
Ag Economy Barometer improvement in farmer sentiment carries over into 2023.
“Although producers were a bit more optimistic about the future this month, they again reported expectations for tighter margins in 2023 than in 2022,” said James Mintert, the barometer’s
TPI Turf News March/April 2023
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