February 2, 2021
The Ag barometer is falling; farmers remain worried about the future despite strong economic conditions
Agriculture barometer drops, farmers remain concerned about the future despite strong economic conditions. (Purdue / CME Group Ag Economy Barometer / James Mintert)
WEST LAFAYETTE, Ind. and CHICAGO – The Purdue University / CME Group Agricultural Economy Barometer fell 7 points in January to a reading of 167. While the current conditions index remained relatively stable, down 3 points to a reading of 199, the future expectations index fell 10 points to a reading of 151. Since its peak in October, the agricultural economy barometer has fallen 9%, all due to lower expectations for the future. The Future Expectations Index has fallen 19% since October, while the Current Conditions Index has risen 12% over the same period. 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 January 18 to 22.
“The continued strength of the Current Conditions Index appears to be due to the continued rise in crop prices, while the deterioration in the Forward Expectations Index appears to be driven by longer-term concerns about policies that may have an impact on American agriculture in the future ”, mentioned James mintert, Principal Investigator of the Barometer and Director of the Center for Commercial Agriculture at Purdue University.
Producers are increasingly optimistic about their short-term expectations for the financial performance of their operations, with nearly a third expecting better financial performance in the coming year compared to 2020. Asked about the amount of their operating loan, 17% of respondents expect their loan to increase this year and, of these, 20% said the increase in the loan is due to the deferral of debt from unpaid operation from the previous year. This implies that 3 to 4% of the people questioned suffer from financial stress; however, this is down from the 5-6% of farms identified as having financial hardship a year ago.
Producers continue to believe that now is a relatively good time to make significant investments in their farms. The agricultural capital investment index has held steady at a record high of 93 over the past two months. The percentage of farmers planning to increase their machinery purchases also remained at its highest level in the past year, at 15% in January.
Farmers also remained bullish on short-term farmland values and cash rental rates. In January, 43% of those polled said they expected the value of farmland to increase over the next year (up 8 points from December) and 27% of those polled said they were expect cash rental rates to increase in 2021 (up 9 points from last month).
The weakening of farmers’ expectations for the future appears to be motivated by concerns about several policy issues. Confidence that the ongoing trade dispute with China will eventually be resolved in a way that favors U.S. agriculture has weakened, falling 12 points in January to 38%. There are also concerns about possible changes in environmental policies, with 83% of respondents expecting more restrictive regulations under the new administration (up 42 points since October). Finally, around 73% and 75%, respectively, expect an increase in inheritance and income taxes over the next five years, compared to 35% and 40% who thought this way in October.
Interest in carbon capture on farms that agree to follow specified production practices has grown as several companies have started offering contracts to farmers. To find out more, the January barometer survey included questions related to carbon capture. Thirty percent of respondents to the January survey said they were aware of the possibilities of receiving a payment for carbon capture. Interestingly, of the 30% who were aware of these opportunities, 22% said they had actively engaged in discussions about receiving payment for carbon capture. This implies that 6-7% of farmers in the January survey considered sequestering carbon by contract.
Finally, to better understand the farming community’s point of view on receiving the COVID-19 vaccine, the barometer survey has asked respondents since October if they plan to be vaccinated. Possible responses included: “Yes, as soon as possible; “” Yes, but not right away; And no. “Interest in getting the vaccine quickly has been on the rise since October. In January, 58% said they planned to get the vaccine as soon as possible, up from 39% in December, 36% in November and 24% in October.
Read the whole Agricultural 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 provides a short video analysis of the barometer results, available here, 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 is impacting farmers. It is available now here.
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.
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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/
Agricultural communications: (765) 494-8415;
Maureen Manier, Head of Department, [email protected]