U.S. Farmers Fear Cost-Price Squeeze

CHICAGO - Nov 2/21 - SNS -- Farmers in the United States are becoming increasingly concerned about a cost-price squeeze on their operating margins, according to the Purdue University/CME Group Ag Economy Barometer.

The index dropped 3 points in October to 121, continuing a three month slide because of weakened perceptions for both current and future conditions in the production agriculture sector.

The Index of Current Conditions was down 5 points to a reading of 140, while the Index of Future Expectations fell 2 points to a reading of 114.

Recent weakness in farmer sentiment appears to be driven by a wide variety of issues, with concerns about input price rises topping the list. Rapid run-ups in input prices, especially fertilizer for crop production, are giving rise to concerns among producers' about their operating margins weakening.

Producer's view of their farms' financial situation was less optimistic in October compared to September. The Farm Financial Performance Index declined 6 points to 104 in October. Over half (51%) of producers in the survey said they expect input prices to rise 8% or more in the upcoming year and one-third of producers said they expect those prices to rise by 12% or more.

While the dramatic rise in fertilizer prices that's taken place in recent months is a key factor; rising input costs also extend to other inputs such as seed, pesticides, and machinery repairs and ownership costs.