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Audio Transcript

[00:00:00] Intro
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James Mintert: Welcome to Purdue Commercial AgCast, the Purdue University Center for Commercial Agriculture’s podcast, featuring farm management news and information. I’m your host, James Mintert, emeritus professor of Agricultural Economics at Purdue University. And joining me today is my colleague, Dr. Michael Langemeier, director of the Center for Commercial Agriculture and professor of Ag Economics here at Purdue.

We’re gonna review the results from the April 2025, Purdue University-CME Group Ag Economy Barometer survey of farmers from across the nation. Each month we survey 400 farmers across the U.S. to learn more about their perspectives on the ag economy. This month’s Ag Barometer survey was conducted from the 14th through the 21st of April.

 

[00:00:45] Overview of the April 2025 Ag Economy Barometer Results
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James Mintert: Michael, the Barometer Index rose eight points to 148 and that leaves it just four points below the recent peak of 152 back in February. And I dunno about you, but I was a little bit surprised at the increase, uh, given what’s taken place. Current Condition Index rose nine points to 141. Again, that was a bit of a surprise. That’s the highest Current Condition Index since December of 2021 and the Future Expectation Index rose eight points to 152.

And we’ve been kind of tracking the relationship between the Index of Future Expectations and the Index of Current Conditions. Future Expectations is still higher than the Current Condition Index, but that gap has really narrowed compared to last fall. Last fall, future expectations were much, much higher than current conditions. Now there are still above by nine points, but that gap is really narrowed quite a bit. So, let’s start off with the beginning, Michael. Were you surprised that the barometer went up this month?

Michael Langemeier: Given the answers to some of the other questions? I wasn’t as surprised as I would be if we wouldn’t have included the trade questions. For example, we’re gonna talk about this later on, uh, but one of the trade questions essentially asked, do you think after the trade war, the, the tariff, uh, imposition of the tariffs, uh, agriculture is gonna be better off in the long run. And over two thirds said, yes. And so I think that helps explain why the Index of Future Expectations is still relatively high.

I’m a little bit puzzled that the, that the Index of Current Conditions is, is as as high as it, as it is. I, one of the things we always have to keep in mind here is there is a fairly large percentage of folks here that are livestock producers, particularly cattle producers, and they, they are experiencing really good economic returns right now.

James Mintert: Yeah, that’s a good point. I think every month, um, a minimum of 19% of the producers in the survey have a beef enterprise. The reality is we usually get more than that. Um, in fact, we’ve been tracking in recent months, starting sometime last year, the exact percentage of people who have a livestock enterprise and what percentage of their gross farm income actually comes from the livestock side. So our, our survey’s probably picking up a little stronger livestock influence from people that have multiple enterprises than than you might expect. And that does help explain it a little bit.

But you really didn’t answer my question, Michael. You, you kind of cheated there a little bit because the first five questions on the survey are what are used to compute the

Michael Langemeier: Yes, I know.

James Mintert: the barometer. And then the other questions come much later. So if you just looked at the barometer itself, were you surprised.

Michael Langemeier: Yes. I, I,

James Mintert: Okay, there you go.

Michael Langemeier: And, and particular the Index of Current Conditions. I, I did not expect that to increase. In fact, I, I expected that to drop a little bit. Um, the sub index is the one I was a little surprised at. You know, given how they answer some of those questions, that the Index of Future Expectations makes sense to me.

James Mintert: The one caveat to that, I guess, Michael, is I would say that, uh, cash prices for corn and soybeans have held up better than you might have expected given some of the trade announcements.

Michael Langemeier: That, that’s definitely the case.

And, and one other thing also that you had to keep in mind is, is there were some payments received because the continuing resolution in December. And also I think people are expecting some payments, uh, if, if these tariffs continue. You know, some payments for compensation regarding the current trade policy.

And so, so if you include the, the fact that livestock producers are doing fairly well, the, the, the crop prices have improved a little bit and the fact that we’re looking at some pretty, pretty sizable government payments in ’25, maybe it makes more sense.

James Mintert: Yeah, I, I think that’s, I think all those factors kind of come together and kind of help explain what’s going on.

[00:04:18] Farm Financial Performance and Investments
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James Mintert: The Farm Financial performance index, uh, it dropped the point, which is trivial in terms of any significance. So sitting at 101, um, that’s still 11 points higher than it was back in October before the November election. 33 points higher than it was in September. And if you look at it on a chart, there’s kind of a sideways pattern here. We’ve been basically above 100 going back to last fall. Um, really in that October timeframe.

So, uh, if you look at it, um, people are basically saying 2025 is gonna be about the same as 2024?

Michael Langemeier: And that’s very consistent with my projections.

James Mintert: One of the surprises, at least to me, Michael, on this report was the Farm Capital Investment Index. It rose seven points this month. That gives us the highest reading for the index since May of 2021. So the index reading was 61. Uh, if you go back a year ago, that index was at 31. 2 years ago, 43. 3 years ago, 36. So it’s one of the highest readings we’ve had in quite some time, and that index really kind of hovered in that 30 to about 45 or 50 range for quite a period of time. So to see it at 61 seems, you know, quite surprising I think with respect to strength.

If you look underneath at the question that that index is based on which is thinking about large farm investments like buildings and machinery, do you think now is a good time or a bad time to buy such items? What’s been driving the change has been looking at it over the last year, for example, uh, fewer people are reporting it’s a bad time, and more people are reporting it as a good time to make investments.

So, a year ago, only 11% of the survey said it was a good time to make large investments. This month it was 25%. A year ago, 80% said it was a bad time to make large investments. This month it was down to 64%.

So the reason I’m a little surprised at this is you and I’ve been looking at this, you know, if you look at what’s taking place with respect to farm machinery sales, they have dropped hard. Uh, really two years in a row. They were down somewhat last year, but clearly down hard in this first quarter of 2025, according to the Association of Equipment Manufacturers. And yet our index was strengthening. So help me out here, see if you can explain this.

Michael Langemeier: This one is very difficult and I don’t have a clear answer, but, uh, along with your, your tractor sales and your combine sales. Another indicator here that does not match with what we’re seeing is the Federal Reserve Bank of, I believe it’s Kansas City. As a capital spending index. That’s really related to machinery and equipment. That thing has just been sinking. Now, they don’t have the first quarter data in yet. Uh, but that thing has been really, has really dropped, uh, dropped in the later part of ’24. We’ll see what the, the first quarter results look like for that index, but it’s certainly inconsistent with what’s been going on here.

James Mintert: Now the follow up is we do ask people, uh, what their plans for farm machinery purchases in the upcoming year compared to a year ago are, and that data is probably more supportive of what’s taken place out there. So the percentage of people who say they plan to increase their purchases of, uh, farm machinery, uh, this year compared to last year has dipped. Uh, this month it was only 6%. If you go back a couple of months ago, it was at 10%. That percentage never seems to get very high. Um, so maybe we’re picking up something that’s a little more consistent there.

And then the other thing that you and I have been talking about is. The, the way the index is constructed, you can get some small changes in that percentage of people who say they, uh, feel like it’s a good time to make investments, and that can have maybe a little bit of an outsize influence on the index itself.

Roughly two thirds of the people in the survey this month still set it’s a bad time to make large investments. And, you know, I, one, one perspective is to say that group is really dominating what’s taking place with respect to new, new, uh, machinery purchases.

Michael Langemeier: Yeah, I think that’s a good way to put it. When we ask people whether they buy used or used or new machinery, if you look at the average over the last several months, 70% buy used machinery.

James Mintert: Yeah. It, so one of the dilemmas we have with our index is when we ask people about making investments, are they thinking about used versus new?

Michael Langemeier: Yeah. We don’t, we don’t distinguish.

James Mintert: Right. So there’s some issues there. We’re gonna do some follow up work and see if we can do a better job of figuring out what’s going on there. And, and probably, uh, I dunno about you Michael. I think my perspective is we need to look harder at trying to figure out more information about the folks who say it’s a good time to make investments.

Michael Langemeier: Yes.

James Mintert: And see if we can figure out if they’re actually doing things and what percentage of the market they really are.

 

[00:08:45] Farmland Value Expectations
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James Mintert: The Short-Term Farmland Value Index was down eight points compared to March. But that leaves it in that range of about 110 to 120, suggesting, I would characterize it as cautious optimism about values, either increasing modestly or, or perhaps holding steady. And, and that, that’s kind of important because the farm balance sheet is tied so heavily to farmland values, so that maybe correlates with some of the optimism we’ve picked up.

Michael Langemeier: I, I definitely think so. Particularly in the long run. Uh, liquidity did slip, uh, in ’24 compared to ’23, but it’s, it’s still not, uh, as low as what it was. You know, like ’15, ’16, ’17, and during that time period. And so liquidities dropped, but it’s not at a crisis point right now. Uh, but, but certainly, uh, certainly the fact that that farmland values are holding up is extremely important, uh, to the, to the non-current portion of the balance sheet. And, and it’s keeping those, uh, leverage ratios fairly low.

[00:09:42] Big Concern for Inputs
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James Mintert: So we ask people about their biggest concerns for their farming operation the next year. And we’ve done that for quite some time now. And, and, uh, the chart that I accompanies this podcast just goes back to September ’cause I thought we’d look at, you know, what was taking place just before the election, uh, versus now.

And not too much change across the board, Michael, except for one thing. And that is the availability of inputs. Going back to last fall, I think in September, only 3% of the people in the survey said that they were concerned about availability of inputs. That’s tripled more than tripled now to 10%. And before the podcast, you and I were talking about this, if you go back in the Covid timeframe, that’s when people are most worried about availability of inputs and they focused, uh, at that time I. I think we got above 15% or so. So we’re not back to where people were in, in the Covid era with respect to concerns about availability of inputs, but it’s, it’s noticeable, right? People are starting to worry about this.

Michael Langemeier: And I think it’s, I think those two are very closely related. Like you said, I think those that probably answered availability of inputs is a, is a big concern, are also probably worried about, uh, increases in, in the prices paid index, which we did ask.

James Mintert: Yeah, that good, good point. So that prices paid index, uh, I think we told them in the question increased by about 2% per year during the last 10 years. And we asked them using that as a frame of reference, by how much do you expect farm input prices to change during the next 12 months?

And you know, it’s, it’s really kind of interesting. I mean, the majority, 63% said zero to 4%, which would be fairly consistent with that 2% from the last 10 years. But 29% said four to 8%. And if you look at it from there going up, I think what 36% of the people in the survey think farm input prices could increase by 4% or more over the next, uh, 12 months. Those are some big increases.

Michael Langemeier: They definitely are some big increases in, there hasn’t been that many years. Uh, in the last 10, maybe one, maybe one or two. Uh, right after Covid there were, were prices increased over 5%.

James Mintert: Yeah. And going back to our previous question, you know, the number one concern and has been really for, for quite some time has been high input cost.

Michael Langemeier: Yeah.

James Mintert: 38% shows that as their top concern. So, you know, why are they worried about that? Well, that fact that 36% think the input prices could increase by 4% or more in the next 12 months kind of explains it.

Michael Langemeier: And really when you look at, when you dig under the hood. Uh, looking at the items that are included in the prices paid, uh, it’s not consistent by any stretch of the imagination. I just updated some information looking at year to year changes in some of the items, uh, in the prices paid for, for farm inputs, for, for an article I’m working on. And there is items, uh, that, that are just almost flat. There’s almost no increase. The big one in prices pay that increase, which we don’t always think about because we talk a lot about crop producers in this survey is the price of purchase livestock.

James Mintert: Yeah.

Michael Langemeier: So that’s driving up the prices paid index because it’s, it’s, it’s such a important component of that. Uh, and, and, and the actual prices paid index includes all the, all the items, uh, used in production agriculture actually increased 6% year to year.

James Mintert: So Michael, when you look at it, uh, for example, the crop budgets,

Michael Langemeier: Yeah.

James Mintert: What kind of crop budget increase are you showing?

Michael Langemeier: They’re, they’re very flat.

James Mintert: With 2024.

Michael Langemeier: With with ’24 because a lot of the inputs that are crop related are, are either up slightly or down slightly. The exception there is diesel is down substantially. And, and some of the fertilizers, potash in particular is, is down from what it was a year ago. And so, uh, when you put all that pieces together, uh, it, it, they’re pretty flat.

James Mintert: Okay.

[00:13:25] Interest Rates and Tarriffs
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James Mintert: We asked people about their expectations for interest rates, and we gave them a little bit of background. The U.S. prime interest rate is currently seven point half percent. What do you expect prime interest rate to be one year from now?

70% of producers said that they look for interest rates to remain either unchanged or head lower. Uh, roughly one out of five, 19% of them said they think rates will be higher a year from now. So, um, that’s, that’s probably consistent with what the Fed has been saying, although we’ve gotten more uncertainty with tariffs and certainly the, the tariff battle between the president and, and Jerome Powell, the Fed, has been kind of interesting but

Michael Langemeier: Yeah, I was thinking about how I, I would answer this question. I probably would go with no change. Because you have some, you have some factors that would, would, would think that maybe interest rates are gonna lower, but on the other hand, you have some, you have some factors that might, uh, you might see higher interest rates. And so yeah, like you said, there’s just a lot of uncertainty with regard to where mo monetary policy is going.

James Mintert: Yeah. The dilemma for the Fed is gonna be, you know, what is the impact of tariffs gonna be on cost and what does that do to inflation? And in turn, what does that mean for monetary policy?

Um, so we ask people what impact do you expect the U.S. government’s imposition of tariffs on imports will have on your farm’s income in 2025? And you know, we asked this I think a month ago, and so we repeated it. This month 56% think tarriffs will either reduce their farm’s income in ’25, well reduce their farm’s income in ’25. If you say no impact and add that, then you’re up to 78%.

21% say they think it’ll actually be positive and and we’re a little puzzled by that, right?

Michael Langemeier: Yeah. I’m very puzzled with with, with that, uh, statement.

James Mintert: You’re not gonna go beyond that.

Michael Langemeier: No, I’m not gonna go beyond that. I just, I, I just don’t see that, but.

James Mintert: Uh, you know, I was thinking about it and we don’t attempt to survey specialty crop producers, but we do pick up some people that produce specialty crops. And that’s probably one of the few areas where I could potentially see some positive impact for coming about from tariffs with respect to restricting imports and maybe having a positive impact.

Michael Langemeier: Yeah, I think you’re right. When I, when I think about tariffs, I, I’m usually thinking corn, soybeans, and wheat. So, and it’s hard to paint a picture where that’s gonna be positive for corn, soybeans, and wheat.

James Mintert: And, and, you know, our, our survey targets the major commodities. It doesn’t try to target people, or especially crop producers. We do pick up some of those folks because they also produce the major commodities. So. But that’s not large enough to account for the 21%. So that’s an interesting response.

Um, if next question was, if a trade war leads to lower prices for U.S. ag products, how likely do you think it is that farmers will receive compensation similar to 2019’s Market Facilitation Program? And again, we asked this, uh, previously. This month, 80% of the producers think of programs similar to the 2019 MFP will help compensate their losses that might recur as a, as a result of the trade war. That’s up, I believe the last time we asked that last month was closer to 70%. So more people are more confident that they’re gonna get compensated. I think that’s probably feeding right back into that current condition index.

Michael Langemeier: Definitely, it’s definitely increasing the Index of Current Conditions.

James Mintert: Uh, we ask people how important is it that a new farm bill be passed in 2025? Um, 72% said it was either important or very important. Again, that’s up from previous times. We’ve, we’ve been asking this question off and on. Uh, that’s I think, the highest percentage we’ve ever gotten to say important or very important.

Michael Langemeier: Which is not surprising to me because the way, the way I, I talk about this issue when, when I’m asked by, by reporters is just think of it this way. You’ve got uncertainty related to trade policy. You’ve got uncertainty related to monetary policy. And you add to that, that we don’t have a farm bill passed. Of course people want the farm bill passed. So we have a little bit of, of, little bit of knowledge or, or, or, or information about where that safety net’s gonna be.

James Mintert: Yeah, I think that’s exactly what’s going on and, and people are really starting to focus on that.

Um. So one of the questions we asked was, do you expect to have some difficulty in obtaining inputs for your farm operation in 2025 as a result of, of tariffs? And just over half, I think 53% of the people in the survey, so kind of a coin toss almost said that they thought they would have some difficulty. And if you said, uh, that you were expected to have some difficulty obtaining, uh, inputs this year? The follow up question went to that group, so it went to just over half the people in the survey, and we said, what do you expect to have trouble with? Number one was fertilizer at 37%. Uh, number two, and really a kind of a, a tie really, uh, was parts for farm machinery and electronics and crop chemicals chosen I think in the case of parts for farm machinery and electronics was 27%. Crop chemicals was 26%. So no real difference there. People weren’t worried about new farm machinery. We only 3% chose that. And then there was the other category, 7%. So fertilizer is, is concern. That’s largely, I think, related to Canada. Yeah. And you mentioned potash.

Michael Langemeier: Yeah.

James Mintert: So far hasn’t had a positive impact on prices,

Michael Langemeier: but it could,

James Mintert: but it could, people are worried about it. Um, and then the parts issue is, is clearly out there and, and chemicals, because we do import a fair number of, of

Michael Langemeier: yes

James Mintert: crop chemicals as well. So there is some concern out there and I think that reflected also in the previous question where we asked him about, uh, top concerns in 10% said they were worried about inputs.

Um, so finally, I think our last question kind of to wrap up the survey was, do you expect the increased use of tariffs by the U.S. to strengthen or weaken the U.S. ag economy in the long run? I think this is the first time we asked this particular question. 70% said they think in the long run it will strengthen the U.S. ag economy. I’m gonna let you comment on that.

Michael Langemeier: I was very surprised that it was 70%. I would’ve thought that it, it might be 50%, but, but 70% was very surprising to me. And, and I think if you, if you asked ag economist this same question, I think it would be flipped that, uh, 70% or or large percentage would say it’s going to weaken.

And, and, and one of the reasons, one of the reasons that, that, that economists would say that is, is when you have trade disputes, like we’re currently, uh, currently having, you worry about your long run market share it. It’s not only do we drop this market share temporarily, how do you get it back? It’s not, once you’ve lost market share, it’s not that easy to get it back. And that’s the big concern I have. Uh, is, is that we’re gonna permanently lose some market share, particularly to China.

James Mintert: Yeah. In terms of our share,

Michael Langemeier: yeah.

James Mintert: Yeah. In China’s imports. Yeah. And losing market share probably to Brazil, right?

Michael Langemeier: Yes.

James Mintert: Uh, so, uh, yeah, you said flipped for ag economist. I, based on the economists that I’ve had chance to visit with, I don’t know anyone who actually

Michael Langemeier: It might be a hundred percent.

James Mintert: would choose strengthen. Uh, so it’s, this is a very curious result. I. I would, I like you, I was surprised at the actual percentage of 70%. I was not surprised. It was a significant positive, uh, ’cause you could pick that up from comments people were making at, at various, uh, press outlets and various meetings and so forth.

So, um, I. But yeah, it’s, it, it again, I think it also explains why the Future Expectation Index is as strong as it is.

Michael Langemeier: Definitely. I think it’s extremely important in explaining that Index of Future Expectation.

James Mintert: Yeah.

Michael Langemeier: Because if you didn’t think this, that index of that, that the future would not look near as rosie, obviously.

James Mintert: Yeah. So that wraps up the highlights of this month’s survey.

[00:21:02] Conclusion and Resources
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James Mintert: You can get the full report on the Purdue-CME Group Ag Economy Barometer website, which is purdue.edu/agbarometer. Of course you can listen to this podcast not only for the Ag Barometer updates periodically, but also a wide variety of topics, which you can subscribe to on all the major co podcast providers as well as on the website. So on behalf of my colleague, Dr. Michael Langemeier and the Center for Commercial Agriculture, I’m James Mintert. Thanks for joining us.