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Audio Transcript

[00:00:00] Intro
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James Mintert: Welcome to the Purdue Commercial AgCast the Purdue University Center for Commercial Agriculture’s podcast featuring farm management news and information. I’m your host, James Mintert, professor emeritus of agricultural economics. 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 agricultural economics at Purdue.

We’re gonna review the results from the February, 2025 Purdue University-CME Group Ag Economy Barometer survey of farmers. 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 10th through the 14th of February.

[00:00:42] Sentiment Rises as Current Conditions Improve
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James Mintert: Michael, the barometer actually rose this month, rose 11 points to 152. And you know, it’s really interesting if you compare that back to October, that’s 37 points higher than the barometer was in October. This month, the rise in the barometer, unlike the last couple of months was really attributable to the increase in the Current Condition Index. That index jumped 28 points to a read of 1 37. That’s the highest Current Condition Index we’ve received in terms of a reading since December of 2021. Meanwhile, the Future Expectation Index changed very little. I think it reached, uh, 159. That was just three points higher than February. So, were you surprised, in particular that we saw that big jump in that Current Condition Index?

Michael Langemeier: Actually, I was, I didn’t think it would rise quite that much. I mean, if you look at the Index of Future Expectations, we’ve talked about this before , people think there’s a different policy environment, uh, since the November election, and they’re more optimistic because of that.

And there is some reasons why the Index of Current Conditions is stronger than what it was last fall, and even December. We certainly have some expected payments, uh, coming from reconciliation in in December for field crops. And so that, that’s helpful. But also, you know, corn and soybean prices, as we noted in the report, are stronger. Particularly corn prices are stronger than what they were last December and, and, and earlier, uh, in, in the fall.

And so there is some reasons why the Index of Current Conditions is higher, but I did not expect it to rise as much as it did. Uh, perhaps what’s happening here is the, uh, the, the, the, the, uh, sediment regarding Index of Future Expectations is pulling up the Index of, of Current Conditions.

James Mintert: Yeah, I suppose there’s some truth in that, but I also think, uh, you know, when you really look at the dramatic shift we’ve seen in commodity prices and combine that with the fact that we’ve got a strong livestock sector.

Michael Langemeier: Yes.

James Mintert: And then as you mentioned, what was taking place with respect to the, uh, government payment, uh, that’s gonna make a big difference for a lot of folks.

Michael Langemeier: ’25 definitely looks better than, than it did three months ago.

James Mintert: And actually the way it’s gonna turn out, ’24 is gonna be better than we thought it was gonna be, for example, back in September, which is what producers are telling us, right?

Michael Langemeier: Yes.

James Mintert: Um, you know, I looked at cash corn prices at at some eastern corn belt locations, and if you look at cash prices for corn in that low point, which was roughly mid-October, and compare that to when we did this survey. Some of those prices were up as much as on corn as much as 25%.

Michael Langemeier: Oh yeah.

James Mintert: That’s a big swing on a per acre basis. And so, yeah, I think we probably got a, a little bit flat footed in the, and sense that we weren’t expecting the Current Condition Index to go up quite this much, but I was looking for it to go up.

Michael Langemeier: Yeah.

James Mintert: But yeah, the, the magnitude of the, of the shift was probably a little bit unexpected. But in retrospect, maybe shouldn’t have been,

[00:03:36] Farm Financial Performance
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James Mintert: Uh, the Farm Financial Performance Index virtually unchanged reading of 110 versus 111. However, if you compare that to last fall and particularly go back to September, it was up 42 points compared to September. It’s up 20 points compared to October. So I think that just reinforces what you were saying about both 2024 and 2025.

Michael Langemeier: Are better than what we thought they were gonna be.

James Mintert: Yeah. Looking at the raw responses to that question that we use to compute that index, as of today, do you expect your farm’s financial performance to be better than worse than, or about the same as last year? And you know, if you look at it, not so much compared to last month, but if you go back a little farther into the fall, for example. There’s really been a shift. And you know, if you go back to, I think October, 26% of the people in the survey said worse than last year. This month that’s down to 15%. I think that kind of explains the shift in, in attitudes.

Michael Langemeier: Yeah, definitely. And you also, when you, this is a tough index to, to look at across years. Uh, when you’re back in ’24, you’re really comparing to ’23. And ’24 wasn’t as good as ’23, even even with the improvements that we’ve seen recently. ’25 looks like it’s gonna be, uh, just as good if not slightly better than ’24. And so, so I’m not particularly surprised that we’ve seen some strengths since, since the first of the year in this index.

[00:04:55] Trade Policy & the Farm Bill
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James Mintert: Um, we’ve asked some policy questions in this month’s survey and the responses are different than what we’ve received on past surveys.

So the first question was, how important is it for you that a new farm bill be passed in 2025? And you know, when we were asking questions about this in 2023, and then again, uh, earlier in 2024, people weren’t that worried about the farm bill. This time around, there’s really been a shift. 47% of the people in the survey said, passing a farm bill in 2025 is very important to their farm operation. 25% said important. You put those two together and you’re at what, 72%? Um, that’s a shift.

Michael Langemeier: That’s a definite, definite shift. And, and maybe there’s some impatience, uh, you know, starting to turn to creep in here. It’s been a while. It’s been, we’re overdue, uh, with this farm bill, to say the least. And so. Uh, so people just want, want to find some legislation there so they can kind of figure out what their expected payments are down the road.

James Mintert: So the, the related question that we’ve been asking periodically is, which of the following, following policies or programs will be most important to my farm in the next five years? And again, we’ve asked this enough that we’ve really got some track record here. This is a shift, right?

Since the election, people have become very worried about trade policy. This month, 44% of the people in the survey said trade policy was number one. Historically, when we’ve asked this question until just recently, crop insurance has always been number one. Uh, this time that was only chosen by 18% of the, of people in the survey. And then after that, it drops off pretty sharply. Interest rate policy was chosen by 13%, energy policy by 9%, and so on down the line.

But clearly people are worried about trade policy. And I don’t know if there’s an expectation that some of that might be incorporated in a farm bill. Do you think those two might be related?

Michael Langemeier: It certainly could. I, I just think when you think about uncertainty and you think about all these different policies, trade policy is certainly more uncertain than the rest of these. I think that’s why it, why it’s chosen by so many people.

James Mintert: Yeah, that’s a good point. And, and you think about the crop insurance, I think the expectation, again, based on some,

Michael Langemeier: It’s a very important program, but they, they know what then, what the parameters are gonna be. At least they expect they know what the parameters are gonna be.

James Mintert: Yeah. I think the expectation is that it’ll continue more or less, uh, unchanged. Right?

Michael Langemeier: Yeah.

James Mintert: So, good point.

Um, we’ve been asking this question for several months now. How likely do you think US agriculture is at risk of a trade war that results in a significant decrease in U.S. ag exports? This month, almost half, 48% of the producers in the survey said that a trade war is either likely or very likely.

And so I, you know, you go back to the trade policy question. They think a trade war is, uh, at least a good chance, I guess, of a trade war taking place. And then thinking about the next several years, they’re thinking trade policy could have a big impact on their farm and the ag economy, right?

Michael Langemeier: Yeah. And I think, I think they’re, they’re right. I think, uh, uh, trades, trade’s gonna be very important here in the next five years.

[00:08:03] Farm Capital Investments
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James Mintert: The Farm Capital Investment Index this month rose to 59, and that was a little bit of a surprise, at least to me, Michael. That’s the highest reading on that index that we’ve gotten since May of 2021. And of course, economic conditions have changed dramatically since May of 2021. So, I don’t know about you, but I was a little surprised that that jumped as high as it did.

Michael Langemeier: I was too, but, but you know, when you, this one really follows both the Index of Current Conditions and the Index of Future Expectations. And so when you see those rise as much as we have, uh, this one’s going to rise, uh, it is just how much, uh, it roses, it’s a surprise to me. I’m not surprised that’s higher than what it was last year. Uh, but it’s at 50, like you say, it’s at 59. We haven’t seen that for a long time. ’21.

James Mintert: Yeah,

Michael Langemeier: Go back to ’21.

James Mintert: And you know, the index jumped last fall, and that was driven by this increase in future expectations that we saw. The interesting thing was this month it was clearly had to be driven by the current condition improvement, right? The fact that things are better today has made this, uh, a better environment to make investments.

And we did the follow up question to folks who said it was a good time to make large investments. We did the follow up and said, you know, what are the primary reasons for that? And again, not so much compared to last month, but especially if you go back to last fall. There’s really been a shift in the percentage of people pointing to strong cash flows as a reason for making investments. This month, 20% of the people who said it was a good time to make a large investment said it was because of strong cash flows. You go back to last September, and that was in the ballpark of 5%. It was definitely well below 10%,

Michael Langemeier: And you point to your increase in corn prices again, corn price being a major commodity, of course. Um, you know, think about, think about if you, if you held onto the crop and sold some of it this spring, or expecting to sell this spring, how much higher those prices are, uh, than what we thought they were gonna be last fall. And so that’s definitely a bump up in cash flow, uh, coming from those, coming from, uh, coming from those, those higher, higher prices or rising prices.

James Mintert: And the other thing people point to, and they’ve been pointed to this for a while, has been the fact that there’s higher dealer inventories, meaning that they think there’s some bargaining space out there, right? So, uh, it’ll be interesting to see how that shakes out in terms of sales.

If you look at the equipment manufacturers, uh, data through the fourth quarter, we weren’t picking up any improvement. So it’ll really be interesting to see how those numbers stack up here in the first quarter of, uh, 2025.

Um, and again, you look at the follow up asking people about their plans for farm machinery purchases in the upcoming year compared to a year ago. Again, if you compare the percentage of people who say they plan to increase their purchases, uh, both in January and February, and then go back and compare that to what people are saying in August and September, the percentage of people who think they’re gonna increase their purchases has doubled. Now it’s still a small number, it’s 10% versus 5% in those in, you know, late last summer and early last fall. But that’s, that’s a jump, right? I mean, there’s some folks out there that are feeling pretty good.

Michael Langemeier: Yeah, definitely. And, and if, if that, if that, uh, Capital Investment Index stays where it’s at, I would expect those that that plan to reduce their purchases in ’25, that percentage to go down right now that’s sitting at it right around 50%. Um. Uh, you know, ’25 does look better than ’24, and so we’ll have to watch this very closely as we move forward.

James Mintert: Yeah. The negatives that, uh, as you mentioned, the folks that plan to reduce, uh, their research machine repurchases has been. In that 50 to 56% range, uh, pretty consistently. I think one month it was down to 45. But still, uh, yeah, that, that really hasn’t shown the, the shift. It’s been that shift in the folks who say they plan to increase,

[00:11:49] Farmland Values
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James Mintert: Uh, farmland, value expectations rose. The Short Term Index, uh, at reading of 118 was up three points compared to February. Again, if you go back to last fall, that’s 23 points higher than it was in September.

So, and if you look at the raw responses to the question, that index is based on, those responses are very interesting. If you compare the responses we got this month to the responses we got back in September, um, there’s a market change, right? This month it was 14% of the people who said they think farmland values are going down. Back in September it was 24%. And on the other side of that coin, the percentage of people who think farmland values are gonna increase over the next 12 months was 32% this month, last fall that was 19%. We’ve really seen a shift there.

Michael Langemeier: Definitely. And we’re back to what we’re, back to we, what we were in 2023, uh, which was certainly a, you know, a different situation for land values than, than what we saw in ’24 where there was some negativity.

James Mintert: Yeah. So there’s the improvement in the Current Condition Index combined with that future expectation improvement we saw starting last fall has really shifted these, these definitely perspectives.

Michael Langemeier: Definitely.

James Mintert: And um, you know, I think a lot of us were thinking farmland values could soften as we headed through 2025. That’s not what producers are telling us.

Michael Langemeier: That’s not what they’re saying.

[00:13:10] Conclusion
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James Mintert: So that wraps up the highlights of this month’s survey. Uh, you can get the full report available on our website, which is purdue.edu/ag barometer, and you can also get some more details on, um, not only this topic, but other farm management topics on our podcast, Purdue Commercial Ag Cast, which is available in all the major podcast providers and at purdue.edu/commercial ag.

So with that. I thank my colleague, Dr. Michael Langemeier for joining us and on behalf of the Center for Commercial Agriculture, I’m Jim Mintert.