May 4, 2021
The barometer of the agricultural economy remains solid; producers concerned about possible changes in inheritance tax policy
The agricultural economy barometer shows good prospects, but concerns. (Purdue / CME Group Ag Economy Barometer / James Mintert)
WEST LAFAYETTE, Ind. and CHICAGO – The Purdue University / CME Group Agricultural Economy Barometer was virtually unchanged in April, up one point from March to 178. Producers are increasingly optimistic about the future.
The Future Expectations Index continued its upward trend from last month, rising 5 points to 169. However, their views on current conditions have slipped. The current conditions index fell 7 points in April, to 195. The Farm Economy Barometer is calculated monthly from the responses of 400 American farm producers to a telephone survey. This month’s survey was conducted from April 19 to 23.
“Strong commodity prices continue to boost expectations of strong financial performance, even as many see input costs rising,” said James mintert, Principal Investigator of the Barometer and Director of the Center for Commercial Agriculture at Purdue University.
The agricultural financial performance index hit a record high in April, up 13 points from March to 138, 83 points higher than a year ago. This month, 50% of producers said they expected better financial performance in 2021 compared to 2020, up from 39% who thought this way in March. Despite expectations for their farms’ strong financial performance, farmers were less inclined to think the time was right for big investments in buildings and equipment than they were in March. However, in a follow-up question, when asked more specifically about their farm machinery investment plans, more producers said in April that they planned to increase their farm machinery purchases than in March.
“The discrepancy between the two answers could reflect rising construction costs and the difficulty of planning construction projects across the United States,” Mintert said.
Possible changes in US tax policy are on the minds of agricultural producers. Ninety-five percent of respondents are somewhat or very concerned that changes in tax policy will make it more difficult to pass their farm on to the next generation. Eighty-seven percent expect capital gains rates to increase over the next five years. Three-quarters said they were “very concerned” about the possible removal of the basic cost mark-up for farmland in inherited estates and just over two-thirds (68%) of respondents said they were “very concerned” about a possible reduction in the exemption from inheritance tax for inheritance.
Farmers expect the rise in farmland values to continue unabated over the next year as the near-term farmland value expectations index hits an all-time high of 159.11 more points than a month earlier. Producers were less optimistic when asked about the 5-year outlook for farmland values, however, as the index of long-term farmland value expectations fell 9 points in April to reach 148.
“The difference between the short-term and long-term expectations of producers could indicate that they are concerned that the rapid rise in farmland value that we are seeing is not sustainable in the long term,” Mintert explained.
With COVID-19 vaccinations widely available in the United States, attention is shifting to the percentage of the American population who do not plan to be vaccinated. To learn more about the vaccination plans of commercial agricultural producers and compare them to the U.S. population as a whole, the survey asked producers about their vaccination plans since October 2020. The percentage of producers reporting “they are not planning to get vaccinated ”rose from a high of 37% in October to 28% in January and has fluctuated between 28% and 32% since then.
Monmouth University polls in January, March and April indicate that 21% to 24% of American adults “will probably never get the vaccine,” while a February Pew Research Center poll indicated that 30% of American adults would “probably” or “definitely” not receive a COVID-19 vaccine. Comparing this month’s survey results to these larger population surveys suggests reluctance to be vaccinated against COVID -19 among American agricultural producers reflects that of the larger population of all American adults.
After a hiatus of almost a year, more farm days, workshops and in-person educational events are planned for 2021. In the March and April Barometer surveys, we asked producers if they were more or less likely to participate in these programs than they were in 2020. Responses were mixed. Just over 70% of respondents said they were more likely to attend in-person events this year, but 28-35% of producers said they were less likely to attend in-person events . For program planners, this implies a need to offer programs in a hybrid or virtual format to reach the large audience of commercial agricultural producers.
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, available, and for even more information, consult the Purdue Commercial AgCast Podcast. It includes a detailed breakdown of each month’s barometer and 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]