US farmer sentiment improved modestly in March, underpinned in part by increasing expectations of lower interest rates and better financial conditions ahead.
Released Tuesday, the latest update of Purdue University-CME Group Ag Economy Barometer - which is based on a monthly survey of 400 producers across the country – showed a 3-point increase from February to a reading of 114 for March.
The improvement in farmers’ financial outlook was buttressed by an improved interest outlook with nearly half of respondents (48%) saying they expect interest rates to decline over the next 12 months, said the barometer commentary. That’s up from 35% of farmers who said they expect rates to decline the last time the question was posed in December 2023. Further, just one-third (32%) of respondents in March said they expect interest rates to increase in the next 12 months compared to 43% of respondents who were looking for rates to rise in the upcoming year when polled in December.
Just 20% of respondents in March said the risk of rising interest rates was a top concern, down from 24% who chose it as a top concern in December. On the other hand, producers remain focused on high input costs as their No. 1 concern, chosen by 36% of respondents in the March survey.
The USDA Federal Reserve has so far resisted the temptation to reduce its policy rate from the current 23-year high of 5.25-5.5%. The Fed is still penciling in three rate cuts this year, although it remains uncertain when the first reduction will come. For now, analysts and economists are generally expecting the first cut in mid-June, although some members of the 12-member Fed board have said there is no rush.
The latest US consumer price index showed US inflation increased 3.2% in February from a year ago, following a 3.1% gain in January.
