January 7, 2025
Farmer Sentiment Drifts Lower While Producers Remain Optimistic About The Future
Farmer sentiment drifted lower in December as the Purdue University/CME Group Ag Economy Barometer dropped 9 points to a reading of 136. The decline was driven by producers’ weaker perspective on current conditions in U.S. agriculture and their farms, with the Index of Current Conditions falling 13 points to 100. Although the Current Conditions Index declined this month, it remains 24 points above its low in September and 5 points higher than in October. The Index of Future Expectations also fell 8 points to 153, remaining 59 points above its September low and 29 points higher than the October reading. This month’s survey was conducted from Dec. 2-6, 2024.
The Ag Economy Barometer sentiment index is calculated each month from 400 U.S. agricultural producers’ responses to a telephone survey. Purdue ag economists James Mintert and Michael Langemeier share some insight into the results of the December 2024 Ag Economy Barometer survey on this episode of the Purdue Commercial AgCast episode.
The full report is available at https://purdue.ag/agbarometer. The audio transcription is available below.
Audio Transcript
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 today, James Mintert, Professor Emeritus of Agricultural Economics here at Purdue. And joining me today is my colleague, Dr. Michael Langemeier, who’s the Director of the Center for Commercial Agriculture and also a Professor of Ag Economics at Purdue.
We’re going to review the results from the December 2024 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 2nd through the 6th of December 2024.
And the Ag Economy Barometer Index declined 9 points this month to a rating of 136. But that still left the index 21 points higher than it was in October. And even more so when you compare it back to September. I think in September it was down all the way to 88. So, uh, Michael, were you surprised that we saw a decline in the barometer this month?
Michael Langemeier: It wasn’t a big enough decline that it really surprised me all that much. I think the key point that you made is still much higher than it was in September and October.
James Mintert: Yeah, from my perspective, it’s probably going to be really interesting to see what happens in January. Going back to 2016, we saw I think three months of increases in late 2016, early 2017 following the first Trump election success. And so, it begs the question, are we going to see a little bit of a rebound in January or maybe did the small decline that we showed in December, is that going to continue into January?
Michael Langemeier: Yeah, my guess is be relatively flat. That’s always the safest guess, right?
James Mintert: The no change forecast.
Michael Langemeier: Yeah.
James Mintert: Okay. When you look at the Current Condition Index and the Future Expectation Index, you can kind of see the difference in terms of what was going on there. Current Condition Index fell 13 points compared to last month to a reading of 100. That’s just 5 points higher than it was in October. The Future Expectation Index declined as well, but only 8 points compared to November, and that left it 29 points higher than October. So Current Condition Index just up 5 points compared to October. Future Expectation up 29 points compared to October. So clearly people are still feeling more optimistic about the future.
Michael Langemeier: And just to give some idea of how unusual this is, there’s a 53 point difference between the Index of Future Expectations, Index of Current Conditions, that’s about unheard of. I mean, perhaps we saw that back in late 2016, but this is not typical. If you do see a difference between those, it’s usually closer to 10 to 20 points.
James Mintert: Yeah, so for listeners, if you have a chance to look at the charts that accompany this podcast, it really stands out when you see the chart. That difference that Michael was just referring to the divergence between the two indices. And you’re right, that’s very unusual to see that take place. So people are really putting a heavy weight on what they think could happen down the road.
The Farm Financial Performance Index dropped back eight points compared to November. But that still left that index above where it was in October. So it’s at a reading of 98 versus 106 last month. But in October it was 90 and going back to September, that Farm Financial Performance Index was all the way down to 68. So again, people are still feeling better about things than they were before the election, certainly in early fall, late summer timeframe.
Michael Langemeier: And, and you put that in perspective, the 98 is higher than it was in early ’24. Uh, if you remember back to early ’24, we had stronger prices, uh, particularly, particularly corn, uh, compared to what we had at the end of the year. And so it’s, and so it’s a little surprising.
James Mintert: Yeah. Yeah, that’s a good comparison. If you go back 12 months. The index was sitting at 97, so we’re one point higher than 12 months ago, and yet we know from looking, for example, the budgets that you maintain here at Purdue, Michael, farm incomes in 2024 are going to be, particularly for corn and soybean operations, going to be significantly lower.
Michael Langemeier: Yeah, they’re going to be quite low.
James Mintert: Farm Capital Investment Index was down 7 points compared to a month ago, but it was still 5 points higher than a year ago. That index is now sitting at 48. Last month we kind of made a little bit of a point of the fact that the index got above 50 because it’s been kind of a trading range of about 30 to 50 for really the better part of three years and we’re below 50 but not by much. And what do you make of that?
Michael Langemeier: I think the Index of Future Expectations is driving this higher than it was in September and October. I mean look at the chart here, we’re 15 to 20 points higher, uh, than we were in September and October. And so I, so I, I point back to the strength of that, that, that five year index.
James Mintert: Yeah, good point.
So, we ask people every month what their plans are for farm machinery purchases in the upcoming year compared to a year ago. And this goes to everybody in the survey. From September through November, fewer people were starting to tell us that they were going to pull back on their farm machinery purchases. This month that bounced back to the upside a little bit. So 56 percent of the people in the survey this month said they were going to have lower farm machinery purchases in the upcoming year. Uh, that’s compared to 51 percent last month, uh, 55 percent in October, and 69 percent in September. So, we’re kind of seeing a little bit of a shift here. For a while there, people, fewer people were telling us they were going to cut back on farm machinery. Now we’re kind of edging back up. Is there a little more realism getting back in this?
Michael Langemeier: I think so, and again, I’ll point to the drop in the Index of Current Conditions. There’s a little bit, a little bit of a drop there, and that’s consistent with an increase. An increase in those that think there’s going to be lower purchases.
James Mintert: Yeah, and the shift is pretty consistent here with respect to where it’s going. It’s basically bouncing between people who say they’re going to hold their machinery purchases about the same on a year to year basis versus pulling back on them.
The percentage of people tell us they plan to increase their purchases, pretty consistent. It’s always a small number. This month it was 8%. Uh, it’s been as low as 5, that was back in September. So we’ve basically bouncing in that 5-8 percent range of saying I’m going to increase my purchases. So the change is always going to be pretty consistently over long periods of time between people saying about the same and pulling back.
So for people who tell us it’s a bad time to make large investments, we’ve followed up and asked why do you feel that way? And one of the things that’s striking, Michael, is the fact that the percentage of people who say it’s because of the uncertainty about farm profitability has really shifted over the last roughly 12 months. You go back to the beginning of this year, 17%. of the people in the survey who think it’s a bad time to make an investment said it was because of uncertainty about farm profitability. That’s virtually doubled. It’s at 35 percent here in December.
Michael Langemeier: This is a really curious, a curious result because it’s a little inconsistent with some of the other results we’re gonna talk about.
I mean, as you said, there’s a large increase in the uncertainty about farm profitability. You could point to a lot of uncertainty related to prices, where prices are heading. Um, uh, and so that’s, that’s certainly possible there. But we also asked a question about safety net, which we’re going to get to here, and they actually think the safety net’s going to be stronger after the ’24 elections. So, I think that’s a little bit inconsistent, uh, with the way they’re answering this chart. Am I reading too much into that?
James Mintert: Well yeah, I’m not sure I agree with you on that one, Michael, because uncertainty about farm profitability could be driven strictly by what’s taking place in the marketplace.
Michael Langemeier: And so not so much downside, but just volatility.
James Mintert: Well, and so you might expect the weakness in farm profitability to be offset by government payments.
Michael Langemeier: Yeah.
James Mintert: Which I think is what we’re picking up on the other question.
Michael Langemeier: Yeah, you’re probably right. That’s probably what they’re thinking.
James Mintert: We’ll talk about that in a minute when we get to that chart.
The other thing that we’ve been pointing to with respect to why it’s a bad time to make large investments has been the impact of interest rates.
And that’s really shifted, especially if you go back to about May. Back in May, 44 percent of the people in the survey who said it was a bad time to make investments pointed to rising interest rates as a concern. That’s down all the way to 20 percent this month. That’s the lowest percentage we’ve gotten, I think, since we started asking that question back in ’23.
Michael Langemeier: Yeah, this is a, this is a, this is a nice result for those selling machinery. Now we can just increase the profits a little bit. Uh, there’ll be more sales of machinery, but this is certainly a good result for those folks.
James Mintert: So if you look at people who say it’s a good time to make large investments in their farming operation.
Um, first of all, in our overall survey, the percentage of people who say it’s a good time to make large investments varies somewhat from month to month, and it’s interesting to watch that trend a little bit. This month, just 17 percent of people in the survey said it’s a good time to make large investments. That’s down from 22 percent who felt that way in November. That number has been as low as I think 13 percent in, in over the course of 2024, Michael. So we’re still up compared to the low, but certainly down from, from what we were back in November. And then when you ask them, you know, why is it a good time to make large investments? Um, the number one thing they point to is the fact that dealers have large inventories, which is obvious if whether you look at the equipment manufacturers data or just drive around and look at machinery lots, right?
Michael Langemeier: Yeah. One of the things that’s interesting about this question is, is how a couple of these bounce around quite a bit.
Uh, you look at opportunities to expand farm. I mean, that can be all the way as low as 5%. It was 15%, uh, in, in December 24, uh, invest in new technology was only 3%. Right. In December, uh, that can, that was over 10 percent during some of the months. And so of these bounce around a little bit, a little, a little hard to explain what’s going on there.
James Mintert: Yeah, and I think some of the bouncing, I think for our listeners, one of the reasons it bounces is because it’s a small number of people each month who say it’s a good time.
Michael Langemeier: Yeah.
James Mintert: We have a survey response, uh, of 400 people every month, um, in round numbers, if one out of five are telling us it’s a good time to make investments, it’s only 80 people, right? So, Uh, that’s, that’s one of the reasons it bounces.
It is interesting though. If you look at the data that we collected from September up through November, the percentage of people who were pointing to strong cash flows was rising. And now this month that dropped back, uh, which I think is probably a reflection of reality.
Michael Langemeier: Yes. Consistent with our Financial Performance Index drop.
James Mintert: Uh, we ask people about their farmland value expectations every month. The 12 month index, the Short-Term Farmland Value Expectation Index, reading was 110 this month. That’s five points lower than a month ago. That’s the second month in a row it’s gone down. It’s gone down by five points both of the last two months, but that still leaves it well above where it was, for example, uh, back in, I think, uh, what, September? September it was down below 100. So, um, a little weaker than the farmland expectations, but still stronger than it was before the election, right?
Michael Langemeier: Yes.
James Mintert: And when we ask people what their main reason that they expect farmland values to rise, among those who said it was expected to rise, um, fewer producers are pointing to inflation. You know, if you go back to, I think, October, uh, 21%, one out of five people who thought farmland values would go up over the next five years, said inflation was a big concern.
The last two months, that’s down to 15%. The other interesting thing on that, Michael, is we started asking about energy production on farmland as a reason why you might or might not be optimistic about farmland values. And those results, going back to April, which is the first time we asked the question, or included that as a response, it’s pretty consistent. Ranging between four and I guess a peak of 12%, but most of the time under 10. In fact, in recent months, it’s been between six and eight this month. That was 8 percent of the people pointing to energy production. I look at the results going back to April. And it’s not the number one factor people are pointing to, but it’s a large enough percentage in a nationwide survey. That energy production is starting to have some impact on farmland values.
Michael Langemeier: Yeah, when we first asked this question, I did not expect it to be 8 to 10 percent. I mean, because it, you know, you hear about this in local situations, and obviously it’s very important. Land market is very thin in some areas. It’s having a large impact. But this is nationwide. And so I did not expect it to be that big. And so it consists of what you’re thinking too.
Strong farm cash flow and low interest rates were indicated that those were important factors, but those are negative right now, and I think that’s what we’re picking up here, with this question here, what is the main reason you expect farmland prices to rise? Those are fairly low bars, uh, strong, uh, strong farm cash flows and low interest rates. The non farm investment demand is positive and then energy. And so energy is helping, uh, particularly in, in, in some local markets.
James Mintert: Yeah, and we’re certainly seeing some of that here in Indiana.
Michael Langemeier: Definitely.
James Mintert: But it, and it varies state by state in terms of what impact you’re having, but it’s interesting.
And, you know, if you look at some of the research, those, you know, there’s a tendency sometimes to think that those impacts are just going to be very local. But some of the research would suggest those really disseminate, right? If you want to think of it in concentric circles, kind of a relationship.
Michael Langemeier: Well, think about how, how, how, how many miles between, uh, between the different farms, that individual farm operates.
James Mintert: Yeah.
Michael Langemeier: So these can be fairly big circles.
James Mintert: Yeah. And of course, from an investment standpoint, if you’re going to invest, you’re spilling over and looking for other opportunities.
So, um, a series of questions we started asking before the election and then continued here after the election, because we’d learned from 2016 and 2020, that Presidential elections can have a big impact on people’s outlook. So, let’s just talk about those results for a minute, Michael.
So, the first one is, do you think environmental regulations impacting agriculture will be more restrictive, less restrictive, or about the same five years from now? And the results in November December compared to October are quite striking. Um, this month in December, 61 percent of the people in the survey said they look for those environmental regulations affecting agriculture to be less restrictive and less restrictive.
And only 7 percent said more restrictive. If you compare that back to October, that’s basically upside down. October was 10 percent said they expect to see less restrictive, uh, um, regulatory environment. Uh, and 41 percent said they expect to see a more restrictive environment. Quite striking.
Michael Langemeier: Yes. Elections do matter when it comes to policy and then we’re, we’re picking that up with this question along with the two tax questions.
James Mintert: Yeah. So just look at the tax questions. The results are very similar. Uh, if you look at, uh, the question said, do you think income tax rates for farms and ranches will be higher, lower about the same five years from now. In October, only 8 percent said they expect to see lower income tax rates. In both November and December, that was up to 36%. And on the higher end, in October, 38 percent said they thought they would see, we would see higher tax, income tax rates. In both November and December, it was, I think in November it was 9 percent said higher and 7 percent in, in December.
And then when you look at estate taxes, almost the same thing with respect to what we saw for income tax rates. Uh, only 10 percent of the people expect to see higher, uh, estate tax rates, uh, in December. Back in October, 40 percent said they expect to see higher tax rates. So people ask us a lot, why did sentiment improve following the election? And the three things we’ve been able to point to, and these are not exclusive.
I, there could easily be some other things, but it’s clear. People expect to see a different regulatory environment. They expect to see a different tax environment. Um, then we’ll get to the last one and that’s trade. Uh, how likely do you think U. S. agriculture is at risk of a trade war that results in a significant decrease in U. S. ag exports? And the results, we, we didn’t ask this before the election. We asked it in November and December. We didn’t think to ask this one in October. Uh, but the results these last two months, very consistent. Uh, 48 percent of producers in December said they think a trade war is either likely or very likely. That’s up a little bit, up from 42 percent who felt that way in November. You know, Michael, as I think about why is the barometer a little bit weaker this month than it was a month ago, this might be the reason.
Michael Langemeier: Yes, I think it could be.
James Mintert: Just this increasing awareness of the risk of a trade war and it having a negative impact on U. S. Ag exports. And then, this is the question that you referred to earlier, Michael, and that is, Do you think that the fall 2024 election outcome will lead to a farm safety net that is stronger than, weaker than, or about the same as before the election? And 55 percent said they expect to see a stronger safety net.
Michael Langemeier: I was a little surprised at this one. I thought it would be, I thought it would be, uh, positive. I mean, there would be quite a few people thinking a stronger safety net. But really, uh, we’re probably likely just going to extend the Farm Bill for another year. And, and even the, even when you looked at some of the Farm Bill, uh, legislation, some of the things that were going to be in, uh, a new Farm Bill, they look very similar. Uh, and, and so, uh, so this is interesting.
James Mintert: So, you and I both do a lot of interviews after each month’s barometer. And one of the questions that came up a month ago when we were doing interviews was, uh, Do people who say they expect to see a trade war, and last month it was 42%, uh, thought a trade war was either likely or very likely, do they expect government payments to make up the difference?
And I kind of think this question points to the idea is that, yeah, people, a significant portion of those folks are probably thinking a little bit like the last time around. If we have a trade problem, we’ll probably have some subsidies.
Michael Langemeier: This is bigger than the farm bill.
James Mintert: Yeah.
Michael Langemeier: It’s crop insurance and these, these trade payments and a lot of other things.
James Mintert: So that wraps up the highlights of this month’s survey. You can get the full report on our website, which is purdue.edu slash ag barometer. Uh, and of course, there’s always more details here on the podcast. If you’re listening to this podcast, uh, perhaps while you’re traveling, uh, I’d encourage you, if you have time, to take a few minutes and download the slide deck that Michael and I were discussing as we recorded the podcast, and you can take a closer look at some of those charts.
Those are available, uh, always for the, for the podcast at purdue.edu/commercialag. And so on behalf of the Center for Commercial Agriculture and my colleague Michael Langemeier, I’m Jim Mintert. Thanks for joining us.
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