March 2, 2021
Producers are optimistic about the value of farmland in the current strong context
Producers are optimistic about the value of farmland in the current strong environment. (Purdue / CME Group Ag Economy Barometer / James Mintert)
WEST LAFAYETTE, Ind. and CHICAGO – Farmers continue to report strong current economic conditions on their farms, according to February Purdue University / CME Group Agricultural Economics Barometer. While the overall reading of the Agricultural Economy Barometer changed very little from January, down 2 points to a reading of 165 in February; The Current Conditions Index remained close to its all-time high of 200. Meanwhile, the Futures Expectations Index continued its four-month decline, down 20% from its October high at 148.
The Agricultural Economy Barometer is calculated monthly from the responses of 400 American agricultural producers to a telephone survey. This month’s survey was conducted from February 15 to 19.
“The continued strength in agricultural commodity prices and farm incomes continues to support producers’ outlook on current conditions,” said James mintert, Principal Investigator of the Barometer and Director of the Commercial Agriculture Center at Purdue University. “At the same time, concerns about possible policy changes affecting agriculture and eroding confidence in future growth in agricultural trade continue to weigh on future expectations of producers.”
Producers are very optimistic about the value of farmland. Fifty-one percent of those polled in February said they expected the value of farmland to rise over the next year, up 8 points from the January survey. U.S. farmers were also optimistic about the long-term trend in farmland values, with 62% of respondents indicating that farmland value is likely to increase over the next five years.
This same uptrend has spilled over to expectations of an increase in cash rental rates for farmland in 2021. In February, more producers (36%) now say they expect an increase in rental rates. cash rental, compared with just 18% who thought that way in December. Those who expected tariffs to remain unchanged fell from 75% to 61%, mainly due to more producers expecting rental prices to increase.
The percentage of farms expecting a better financial performance in 2021 compared to the previous year has been increasing since last summer and reached 37% in the February survey, up 4 points from the previous year. to January and 25 points more than last July. When asked about their perception of the most critical risk facing their operation, 29% ranked production, up 8% from February 2020, and 18% ranked financial risk, down 8% from one year ago.
Every winter, the barometer survey asks people questioned about the growth projects of their farms. This Winter: Fifty percent of commercial scale farms said they had no plans to expand or plan to leave or retire within the next five years; 17% expect their farm to grow at a rate of less than 5% per year; 25% expect their operations to increase by 5-10% per year; and 9% expect their operations to grow by more than 10% per year. Overall, Mintert said, these results indicate continued consolidation in the agricultural sector.
Although producers are optimistic about the current state of their operations, confidence in the future continues to erode. The reasons for the 20% drop in the index of future expectations since October appear to center on concerns about the long-term future of agricultural trade and uncertainty over various policies affecting agriculture. In February, only 45% of farmers expected an increase in agricultural exports over the next five years, up from 65% in October. The percentage expecting a favorable outcome to the trade dispute between the United States and China is also down, 37% in February from 65% in October.
“Even though we have seen a recent ‘acceleration’ in agricultural exports to China, producers remain concerned about the future of agricultural trade,” said Michel langemeier, associate director of the Commercial Agriculture Center. They are also concerned about the possibility of more restrictive environmental regulations as well as higher property and income taxes, all expressed in previous surveys of the Barometer. Uncertainty about all of these factors seems to be the motivation for the divergence between the farmers’ point of view on the current situation versus the future situation. “
Interest in alternative protein sources has grown significantly over the past year. Respondents in the February survey were asked several questions to get their perspective on the possible impact of alternative proteins on American agriculture. More than half of producers have indicated that they expect to see alternative protein sources increase their market share in the coming years (55% expect total protein market share of up to 10 %; 15% expect total market share to exceed 10%) and indicated that if market share becomes large, they think it will likely reduce overall farm income.
Read the full Ag Economy barometer report. The site also offers additional resources – such as past reports, charts, and survey methodology – and a form to sign up for monthly Barometer email updates and webinars.
Each month, the Purdue Center for Commercial Agriculture offers a brief video analysis barometer results, and for even more information, check out the Purdue Commercial AgCast podcast. It includes a detailed breakdown of each month’s barometer, in addition to a discussion of the latest farm news that impact farmers. Available now.
The Agricultural Economy Barometer, Current Conditions Index and Future Expectations Index are available on the Bloomberg Terminal under the following ticker symbols: AGECBARO, AGECCURC and AGECFTEX.
About the Purdue University Center for Commercial Agriculture
the Commercial Agriculture Center was founded in 2011 to provide professional development and education programs to farmers. Based within the Department of Agricultural Economics at Purdue University, the centre’s faculty and staff develop and execute research and educational programs that meet the various management needs in today’s business environment.
About the CME Group
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Writer: We are Goodwin, 765-494-6999, [email protected]
Source: James Mintert, 765-494-7004, [email protected]
Aissa Good, Purdue University, 765-496-3884, [email protected]
Dana Schmidt, CME Group, 312-872-5443, [email protected]
Purdue University Center for Commercial Agriculture: http://purdue.edu/commercialag
CME Group: http://www.cmegroup.com/