Farmer Sentiment Drops Sharply — What It Signals for Farm Finances in 2026

Audio Transcript

Michael Langemeier: Welcome to Purdue Commercial AgCast, the Purdue University Center for Commercial Agriculture’s podcast featuring farm management news and information. I’m your host, Michael Langemeier director of the Center for Commercial Agriculture and Professor of Agriculture Economics. Today I’m gonna be flying solo. Next month Joana Colussi, which is actually a co-author on this month’s report, will be joining me.

I’m going to review the results from the January 2026 Purdue University-CME Group Ag Economy Barometer survey of farmers across the nation. I think you’ll find the results very interesting. There was a sharp drop in sentiment this month and so we’ll get into that. Each month we survey 400 farmers across the U.S. to learn more about their perspective on the ag economy. This month’s Ag Economy Barometer was conducted from the 12th through the 16th of January. As a point of reference, the January WASDE report came out on January 12th. We did not ask any questions about that report, but certainly the report probably had a negative impact on sentiment.

So let’s take a look at the Ag Economy Barometer Index. Just as a reminder, late 2015 to early 2016 are the base period, so that period is a hundred. Turning to the current situation, we had a drop of 23 points from 136 to 113 in the Ag Economy Barometer Index. And it brings this index to the lowest it’s been for quite a while. In fact we haven’t seen this lower reading, since September 2024, which of course was before the 2024 election. So, this was a pretty big shock in terms of sentiment. Last year, the index was 28 points higher, sitting at 131. So it’s a big change, from last year too.

So let’s dig in a little bit, look at the two sub indices. Both sub indices were down sharply. The Index of Current Conditions was down 19 points. That’s the lowest since January ’25, the reading of 109. The Index of Future Expectations dropped to 115. That was a 25 point drop. Very large drop, in the Index of Future Expectations. That’s the lowest index since September 2024.

We’re gonna get into some of the reasons why sentiment might have declined. There’s actually, I think, several potential reasons. One of those is, as I indicated, the news coming outta the January WASDE was not positive, particularly not positive for corn. They actually increased the U.S. yield by a half bushel. And they also increased the harvested acres, increasing the stocks to use, up to about 13.5%. So that might have been part of it.

There’s also,more negativity regarding exports. Also the indices related to financial performance were more negative this month than they were in December. So there’s several reasons for the drop in the Ag Economy Barometer and the two sub indices.

One of the things I wanted to highlight, we typically don’t do this, but wanted to highlight one of the questions in particular, that makes up the Ag Economy Barometer Index. There’s five questions going to Ag Economy Barometer, all five of those declined, in January compared to December. But in particular, this particular question here, showed a rather substantial decline in the index. Looking ahead, do you think it is more likely that U.S. agriculture during the next five years will have widespread good times or widespread bad times? The percentage that indicated good times dropped sharply, from 46 to 34%. The percentage that said bad times went from 24% to 46%, so a very large in the percentage that indicated that they thought agriculture was gonna have bad times in the next five years. This helps explain why the Index of Future Expectations declined so much. It was primarily due to this particular question.

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Speaker: If we look at the Farm Capital Investment Index, like we typically do, there was also a drop in this index. Typically, when the Index of Current Conditions drops, you also see a drop in the Farm Capital Investment Index. We’re still in a rather tight band from 45 to 60, but this certainly is lower, than what it’s been reading in the last year. I think it’s noteworthy that almost three fourths of the respondents indicated that now is a bad time to invest in machinery. The percent that thought it was a good time actually ticked up a couple percent. It was 20%. But more negativity, by,a vast majority of the respondents in terms of making purchases of machinery and buildings drove this index downward.

In a related question, we ask do you think you’re gonna increase, decrease, or remain the same your purchases of machinery. Only 4% indicated that they thought they were gonna increase purchases of machinery in 2026. So a very low percentage.

I won’t spend a lot of time on this question because this really hasn’t changed that much. We’re still looking at lower crop prices and higher input costs being the two biggest concerns. And margins are very tight in the crop sector in particular. And overwhelmingly, if you remember, the people that responded to the survey about 70% are primarily crop producers, and so, those type margins are reflected in how they answer this particular question.

I said at the beginning that exports were also partially to explain, why there was a drop in sentiment. And I think this chart does a nice job of showing that. If we look at December’s results, 52% thought there was gonna be increase in exports the next five years. And only 5% a decrease. That’s changed rather dramatically for one month. It dropped from 52 to 42% in terms of increase exports. It’s still higher than what we were sometime in early ’25 and late ’24. That percentage, but the percent that thought they were going to, decrease actually increased to 16%. That’s a rather sharp increase for one month. And so that also helps explain why the Ag Economy Barometer index declined.

Digging into this a little bit more, we asked questions to corn and soybean producers exclusively, over 80% of the respondents indicated that they grew corn and soybeans in 2025. So that’s what this question went to. And so of these people, 21% thought we were gonna have a decrease in soybean exports. The next question we asked in December also, how concerned are you about the competitiveness of U.S. soybean exports with Brazil’s exports? 80% said they were concerned, or very concerned. With very concerned being 44%. Obviously the soybean exports has been a bit of a roller coaster in ’25 and the start of ’26, and so that’s why we asked that question.

There’s not a lot to really talk about in terms of farmland values other than, the Short -Term Farmland Value Expectations Index remain the same. This is really curious because typically when you see a drop in the Index or Current Conditions, you see at least some softening, in the Short -Term Farmland Value Expectations Index, but we didn’t. This tells me that farmland values are holding steady, or stable. And indicating that the index hasn’t changed all that much in the last three months.

Taking a little deeper dive here, we look at percentage that thought farmland value is gonna increase in the next 12 months compared to decrease. There was a slight uptick in those that thought they were gonna decrease, but it’s still relatively small, compared to the percentage we’ve seen, in previous months. 30% thought that farmland values were going to increase.

Some questions that we ask every January, and I’m showing you results here from January 2020 all the way through January ’26, is a couple questions related to operating loans. The first questions asked, if respondents expect the size of their operating loan to be larger, smaller, or about the same this year. If you look at this compared to January ’25, it was somewhat similar. We did see a slight uptick in the percentage that thought their operating loan was gonna be larger. 21% in January ’26 and 18% in January ’25. This is the first question of a two question series.

The second question is usually more interesting and what we do there is we take a deep dive and we look at the reasons why people expect a larger operating loan. It’s one thing to expect a larger operating loan due to higher input costs, than unpaid operating debt. There’s a lot of difference between those two. And so let me explain that a little bit.

First of all, if we look at this over time, in January ’21, ’22, ’23, and ’24 , over 60% said they were gonna increase their operating size because of higher input costs. Since January ’25, that’s been around 50 to 55%, say they’re increasing the size of their loan because of an increase in input cost. Of course, break even prices remain relatively high, particularly for crops right now, but also for quite a few livestock species. That’s not real surprising, that would be the main reason why you expect a higher operating loan. What I want you to focus now on, though, is that last one, that third one, unpaid operating debt. This can be a signal that perhaps they’re having some difficulty because of tight cash flow or low cash flow in repaying operating debt in a timely fashion. You can see that this has been a bit of a roller coaster over time. It was 35% in ’20 it dropped all the way to 5% in January ’23. Not very much financial stress in that ’22, ’23 period. Those were good profit margin years. It increased to 17% and 23% in ’24 and ’25. And then in January of ’26, that increased to 31%, which is slightly lower than the 2020 number, but pretty high compared to what it was even last year, and particularly high with what it was in ’23. And so to me, that signals along with a higher percent, expect larger operating loans. If you combine that with this particular question, if you’re increasing the size of your operating loan primarily due to unpaid debt, that’s probably a signal that we’re seeing more financial stress here in early ’26 then certainly what we saw in ’23 and ’24. And so financial stress appears to be increasing.

We also asked this month, this is a question we’ve asked periodically through time, and so we don’t always ask this question every January, but we’re gonna start including it in the January questions along with the operating loan questions. ‘Cause I think it goes right along with that. ‘Cause you think about financial stress, you’ve really got two things that are critical to financial stress. One of those is low cash flow. I usually say negative profit margin. That’s a signal that there’s financial stress. The other signal, and these have to be, these are usually tied together. The other signal is a weak balance sheet. And so that’s why we asked a question related to balance sheet.

And this is self-identified strength. I mean, obviously we’re not looking at their individual balance sheets. But if you look at this, about 75% indicated that either they agreed that they had a strong balance sheet, or strongly agreed that they had a strong balance sheet. And so even though the cash flow is really tight, for a lot of the respondents, their balance sheet is relatively strong.

I wanna tie this back to the farmland question. You know, farmlands are holding steady. That’s helping create a situation where the balance sheet is remaining relatively strong. Now one of the things you have to keep in mind when you’re thinking about financial stress, you’re thinking about low cash flow, you’re thinking about balance sheet, is strong land values are great from a strength of the balance sheet standpoint. But I’ve been told by many people, you can’t spend land appreciation, unless you borrow against that land. It’s not a cash flow. And so that doesn’t help your cash flow situation, but it certainly prevents there from being a lot more financial stress, than there would be otherwise. There would be a lot more financial stress if land values started to weaken.

Another question that we asked, we asked this prior to the announcement in December of the details related to the Farmer Bridge Assistance Program, and the results are very similar to what we asked before. In anticipation of these payments, majority of the respondents indicate that they’re gonna pay down debt. There’s some unpaid operator debt or some other debt that they’d like to reduce a little bit, this is an opportunity to do so. 25% said they were gonna improve working capital. Certainly when you have low cash flow like we’ve had in ’24, ’25 and ’26, again, I’m talking primarily crop producers. That’s gonna draw down your working capital or reduce your liquidity, specifically reduce your current ratio. And so one of the ways to strengthen that current ratio in anticipation of possibly low net returns in ’26 again is to increase working capital. So that was 25% and then about 10% said they were gonna cover family living expenses or invest in machinery.

I want to talk about one of the questions that we’ve been highlighting for several months now. And the reason we highlight this question is, this question is related to the Index of Future Expectations. If you think the policy environment in U.S. agriculture is relatively good, that’s going to improve your sentiment with regard to the next five years. Once, your sentiment in the next five years, gets reduced a little bit, like it was this month, that probably means you have different thoughts about the long run policy environment. This question certainly talks about the long run policy environment. And you can see here in this chart that was a rather large reduction in the percentage of responds that said that the U.S. today is headed in the right direction. And again, I tie this directly to the drop in the Index of Future Expectations. This certainly contributed to that drop in the Index of Future Expectations.

And so these are the highlights from the Ag Economy Barometer for January 2026. I encourage you to check out the report on the Ag Economy Barometer website. I hope to see you again next month.