June 1, 2021
The barometer of the agricultural economy has fallen sharply; producers remain optimistic about the value of farmland
The barometer of the agricultural economy has fallen sharply; producers remain optimistic about farmland values. (Purdue / CME Group Ag Economy Barometer / James Mintert)
WEST LAFAYETTE, Ind. and CHICAGO – The Purdue University / CME Group Agricultural Economy Barometer saw a significant drop in May, down 20 points to a reading of 158. This was the lowest reading in the survey since September. Producers were less optimistic about current conditions and the future of the agricultural economy. The Current Conditions Index fell 17 points to 178, and the Future Expectations Index fell 20 points to 149. The Farm Economy Barometer is calculated monthly from responses from 400 US farm producers to a telephone survey. This month’s survey was conducted May 10-14.
“The potential for changing tax rules and rising input costs seem to be on the minds of producers this month and have been the main drivers of the drop in the agricultural barometer,” said James mintert, Principal Investigator of the Barometer and Director of the Center for Commercial Agriculture at Purdue University.
Producers have expressed less optimism about their farm’s financial performance this month. The agricultural financial performance index fell to 126, from a record 138 in April. Although the May index was 12 points lower than a month earlier, it was still the second highest value since the financial performance question was first asked in the spring 2018, suggesting that high crop prices continue to support farm incomes.
In May, more producers said they expected to cut back on machinery purchases and construction plans over the next year. The farm capital investment index fell 10 points in May to 65. This month’s survey included a new question focusing on producers’ plans to build new buildings or grain elevators. Fifty-nine percent of those polled said their building plans for the coming year were lower than a year ago, and only 28% said their building plans were about the same than a year ago.
“Rising construction costs are likely a contributing factor to weaker construction plans,” Mintert said.
Producers remain very concerned about possible changes in US tax policy. In a series of questions first asked last month, 78% of survey respondents said they were very concerned that the proposed tax policy changes would make it harder to pass their farm down to the next generation. In addition, 83% of producers expect capital gains tax rates to increase over the next five years; 71% are very concerned about a possible loss of the basic cost mark-up for estates; and 66% say they are very concerned about a possible reduction in the exemption from inheritance tax for inheritance.
After dropping last month, the index of long-term farmland value expectations rose 10 points to a record high of 158, with two-thirds of producers surveyed saying they expected land values to rise. agriculture increases over the next five years. The near-term farmland expectations index has remained near its all-time high, falling just 2 points below the all-time high set in April of this year.
Producers also remain bullish on spot rental rates. In the May survey, producers who grow corn or soybeans were asked about their expectations for cash rental rates in 2022. Two-thirds (65%) of corn / soybean farmers surveyed said they were expect next year’s cash rental rates in their home region to exceed 2021. In a follow-up question, producers who said they expect rental rates to increase were asked how much they expected to increase the following year. Forty-three percent of those polled said they expected 2022 cash rental rates to increase by 10% or more, and 39% said they expected cash rental rates to increase from 5%. % to 10%.
Producers’ expectations of good times and bad in American agriculture have undergone a marked shift. For example, in May, just 27% of those polled said they expected good times for U.S. agriculture over the next five years, the lowest result in survey history and down from 12 points compared to the previous month. One of the drivers of this change appears to be the gap between expectations for the crop and livestock sectors over the next five years. This month, more than half (54%) of those polled said they expected a good period for the crop sector in the next five years, while only a quarter (26%) of growers said expect a good period for the livestock sector.
“The difference in expectations for these two main sectors of the agricultural economy could help explain why producers appear to be very optimistic about farmland values and cash rental rates while expressing less optimism about current conditions and future expectations of the agricultural economy. overall, ”Mintert said.
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 offers a brief video analysis of barometer results. For even more information, see the Purdue Commercial AgCast Podcast. It includes a detailed breakdown of each month’s barometer plus a discussion of the latest farm news that impact farmers.
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]
Aïssa Good, Purdue University, 765-496-3884
Dana schmidt, CME Group, 312-872-5443
Agricultural communications: (765) 494-8415;
Maureen Manier, Head of Department, [email protected]