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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, who’s the director of the Center for Commercial Agriculture and also professor of agricultural economics at Purdue.

[00:00:25] Overview of March 2025 Ag Economy Barometer Results
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James Mintert: We’re going to review the results from the March 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 10th through the 14th of March.

And Michael, the Ag Economy Barometer Index fell 12 points to 140 this month. Still left at 25 points higher than it was in October. And essentially we gave back the improvement in the barometer that we picked up last month. So we’re pretty much back where we were in January.

[00:01:01] Current Conditions and Future Expectations
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James Mintert: And as you look at the Index of Current Conditions and Future Expectations, Current Conditions index fell 5 points to 132. That still leaves that index, though, 37 points higher than it was back in October. And the Future Expectation Index, which was really the driver of the drop in the barometer, fell 15 points to 144. But that left that index still 20 points higher than it was in October. So, when you look at all of that together, Michael, what’s, what’s your take?

Michael Langemeier: I wasn’t surprised that it dropped because certainly, you know, certainly after we, we did the, we did the February interview, February 10th to 14th, if my memory serves me correctly. And after that, there was more of an eminent threat for tariffs. And so, and prices. a decline, particularly, particularly for corn and soybeans. And so I wasn’t, I wasn’t surprised that it dropped, um, and I’m not that surprised that it dropped as much as it did. I thought maybe it dropped a little bit more even, but I was a little surprised that we didn’t take more off the Index of Current Conditions.

But, but to be fair, when people are answering this, it’s hard to figure out whether the tariffs are going to impact more in the future. Um, you know, the next few years are they’re going to be have a more current impact and, and, and what the, what, what the respondents basically said is both.

James Mintert: Yeah, I guess a little like you, Michael, the Current Condition Index only falling five points was a surprise to me because by the time we did the survey, this go around, we’d seen a significant drop in both corn and soybean prices, crop prices in general, and I thought that would really show up in the Current Condition Index more than it did with that five point drop. And the Future Expectation, you know, I think that really is about the tariffs and just really, I think it’s a measure of uncertainty is what it really is, right?

Michael Langemeier: Uncertainty in the policy environment. That’s probably more policy environment oriented.

[00:02:48] Farm Financial Performance and Investments
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James Mintert: So the Farm Financial Performance Index fell, not too surprising there, but it was only a drop of eight points to 102. Again, that left that index 12 points higher than it was before the November election back in October.

And I think, you know, one of the things I keep comparing Back to October, partly because it’s clear as you go through the results of this survey that the improvement and optimism we picked up following the election has largely been retained, even though there is this rise in uncertainty and concern about the trade policy. We’ll talk more about that later, but that’s, that’s really interesting to me that we can keep that Farm Financial Performance Index up above 100.

Michael Langemeier: Yeah, yeah it is, but if you look at, if you look at net farm income prospects, particularly for crop producers, ’24 and ’25 looks about the same.

James Mintert: Well, it did. I’m not sure that’s going to be true. I’m not convinced of that, Michael, but we’ll see how that plays out given what’s taken place with respect to commodity prices over the last roughly 30 days.

Um, Farm Capital Investment Index fell 5 points to 54, but again, if you look at the history, That’s still the second highest investment reading we’ve gotten since June of ’21. Last month was the highest, that 59 that we had last month. But again, we lost a little bit of ground there, but not a lot.

Michael Langemeier: And it just shows that that February number of 59 was not a blip. Yeah. That might persist for a while.

James Mintert: And when we look behind it a little bit, and we ask people about their actual plans for farm machinery purchases in the upcoming year compared to a year ago, there wasn’t much of a change there. Um, a small decline in the percentage of people who said they expected to increase their purchases. Probably, well, almost assuredly not enough to be statistically significant. It went from 10 percent for two months in a row, January and February, back to 8%, which is where it was last fall. It is stronger than it was last summer. Last summer that dipped down to 5%.

So, uh, not enough change there to suggest too much going on there. But again, I guess given what took place, I thought maybe people would pull back a little more than what we’re picking up in the survey.

[00:04:52] Farmland Value Expectations
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James Mintert: Short-term Farmland Value Expectation Index at 118 was unchanged from a month earlier. And, you know, when I look at that index, um, it just kind of tells me that people are cautiously optimistic that farmland values will hold steady or maybe increase modestly in the year ahead. That’s a more optimistic outlook than we had late last summer and early last fall. I mean, the index is quite a bit stronger than it was, uh, in, during that time frame, back in August and, uh, September, when that index really took a dip. What’s your take on farmland values?

Michael Langemeier: So even though crop prices come down, we talked about that, even though crop prices have come down, and they came down in late February, uh, we’re still still at 118, the exact same number we were, uh, the month before. And so, so yeah, I, I, I think this is a very interesting result.

Uh, having said that, uh, typically when the Index of Current Conditions is, is relatively strong, like it is right now, uh, that also makes this index a little bit stronger. They’re highly correlated.

James Mintert: We’ll talk more about this in a minute, but do you think the expectation of receiving government payments, which are apparently headed out this month, um, and then the possibility of, further compensation from the USDA might be factoring into these farmland value expectations.

Michael Langemeier: Definitely. And we didn’t, we didn’t ask about cash rent, but I think it’s also going to factor into cash rent negotiations.

James Mintert: So when you look at the farmland price expectation responses, not the index, which is computed off the responses, but the actual raw responses themselves, one of the things you can see is the reason the index didn’t change is both the percentage of people who expect higher farmland prices and the percentage of people who expect lower farmland prices. Both went down, and I don’t know about you, Michael, but for me, that just points to uncertainty.

Michael Langemeier: And then, it’s interesting though, I’ll go back to something that you said, that this index is so much stronger than it was last summer. Just to put that in perspective, back in August and September, over 20 percent thought farmland values were going to go down, now it’s only at 13%.

James Mintert: Yeah, so it’s, it’s, um, well, as you indicated earlier, this index tends to be correlated with the Current Condition Index. Uh, it’s not perfectly correlated, but it tends to move somewhat in line with that. It’s really interesting that we have not lost more optimism given what’s taken place with respect to income prospects, I guess is how I’d put that.

Um, so one of the things that we’ve been tracking going all the way back to 2019, we actually started asking this question a little bit in 2018, but we didn’t ask it every month. We started asking it every single month in 2019.

[00:07:27] Long-term Ag Export Outlook
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James Mintert: And the question is, over the next five years, do you think ag exports are more likely to increase, decrease or remain about the same?

And when we asked the question back in 2019 and 2020. People were very positive, very optimistic about exports growing, uh, with responses between 50 and 70 percent of the people in the survey telling us they expect to see exports increase. Starting in about the middle to maybe the end of 2020, people started becoming less optimistic about exports.

And as you look at it, it’s been on a downward trend ever since this month. What was interesting was the percentage of people who actually think exports are going to decrease jumped. Uh, and it’s been rising somewhat as we headed through 2024, but this month I think it was up to 30 percent and we are almost 50, 50 now almost equal with respect to the percentage of people who think that exports are going to increase versus the percentage of people who think exports are going to decrease over the next five years.

We think this is kind of interesting because historically export growth has been an engine of growth for the U. S. ag economy. So this loss of optimism about exports and the fact that it seems to be correlated now with the concerns about tariffs is is really indicative of a change in attitude.

Michael Langemeier: And is very disconcerting to certain markets. I mean, wheat and soybeans come to mind, but there’s certainly other markets that are very, very dependent on exports. And just to put this in perspective, you know, 30 percent of the people thought we’re gonna have a decrease in exports in March. This had never been above 22 percent and the 22 percent occurred since the since the, uh, the The 2024 elections. And so, uh, and so this isn’t something that’s, that’s happened, uh, before. And so this, we’re in different territory here.

James Mintert: Yeah, it’s again, it speaks to the idea about people’s long term optimism. I, I’m a little surprised that we’re seeing as much optimism as we are with respect to the future when there’s this much negativity about what’s going to take place with exports?

Michael Langemeier: Yeah, you’re right. This is just somehow just a match.

[00:09:38] Policy Concerns and Farm Bill Importance
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James Mintert: Um, we’ve been asking a question about which policies or programs will be most important to your farm in the next five years going back to 2022. And for listeners that have a chance to take a look at the charts, the chart for this is quite striking. When you look at people’s expectations about the importance of trade policy versus interest rate policy. We had a period of time when people were pointing to interest rate policy as the top concern, most important. And that was really the case during much of 2022 and continuing through 2023. Since the election, that’s really changed.

Uh, now it’s all about trade policy. The last four months, I think we’ve averaged about 43 percent choosing trade policy as the most important policy for their farm in the next five years.

And on the other hand, we’ve gone from, uh, as much as 26 or 7 percent of the people choosing interest rate policy as the most important policy. This month it was only 10%. So, there’s really been a, a big change there. People are really focused on trade policy and the potential impact it’s going to have on their farm.

Michael Langemeier: And, and I don’t think this means that people aren’t worried about interest rate policy, environmental policy, crop insurance, some of the other things that we, we had people choose, uh, choose in terms of policies. I just think it just, it just tells us that trade policy is definitely, uh, the most important thing on their mind.

James Mintert: Yeah, and you mentioned some of the other policies. It is interesting, especially since the election we have for so a comparison. We asked this question in August, and then we had a gap. We didn’t, I guess, ask it again until December. But if you look at the comparison before the election, after the election, people are clearly less worried about climate policy, conservation policy, environmental policy than they were before the election.

The percentages vary somewhat by month, uh, but if you go back, for example, environmental policy in August was at 11%, chose that as a top concern. This month it was 7%. Um, conservation policy back in August was chosen by 9%. This month it was 6%. Um, climate policy in August was chosen by 9%. This month it was 6%.

And as you look at it, it’s clear there’s been a shift there. Not as dramatic as what we talked about with respect to trade policy, but clearly people are less worried about those kinds of policies now than they were before the election.

Michael Langemeier: Yeah, the perceived policy environment has definitely changed.

James Mintert: Um, it’s a question we’ve asked several times over the last, really, two years, I think. How important is it for you that a new farm bill be passed in 2025? And the last couple times we’ve asked it since the election It farm bills become much more important. This month, it was chosen by, uh, I think 74 percent of the people in the survey said it was either important or very important that a farm bill be passed in 2025.

Michael before the broadcast, we were talking about this a little bit. You go back in time. We asked this earlier in 2024 and people weren’t worried about a farm bill.

Michael Langemeier: Not at all.

James Mintert: So Clearly, people are more worried about having a safety net in place in legislation, I think, than they were prior to the election. Uh, is that fair to say?

Michael Langemeier: Yeah, and I think that what this points to is we’ve been talking about policy uncertainty. This, this relates to that point, and I think there’s two things going on here in my mind.

One is crop net returns are are not expected to be very high. They weren’t that good in ’24 and they’re not expected to be very good in ’25. And so I think there’s more, there’s more demand for safety net. You know, crop insurance is that is that a current year safety net. The farm bill is a multi, multiple year safety net. And so they’d like that safety net employees to try to offset some of the policy uncertainty related to trade.

James Mintert: Yeah, good point.

Um, so one of the questions that we asked this month, this is the first time we’ve asked this, 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 43 percent said negative impact. If you add the very negatives to the negatives, you’re at 57%. So clearly a majority are worried about this.

Um, a few people, a small percentage, I think 25%, think it’s either going to have a positive impact or a very positive impact. So, um, again, getting back to trade policy, people are worried about this. They think it could have a negative impact on their incomes.

Um, the follow up 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 roughly two thirds, 65 percent, said they think that’s either likely, and that was chosen by 52 percent, or very likely chosen by 13 percent. What’s your take?

Michael Langemeier: I think this is one of the reasons why the index of current conditions and index of future expectations didn’t drop as much as we thought it might. Uh, is, is, is in the back of the back of back of people’s minds, this was, well, if we do have lower, lower net income because of trade, we we’re likely to get these payments. And so I, I just think that that helps explain, uh, why, why the, the Ag Economy Barometer Index is as high as it is, given all of this policy uncertainty.

James Mintert: Yeah, I think previously, you and I had speculated that this might be going on behind the scenes. And so this month, we actually asked the question directly, and it really kind of confirmed what we thought was perhaps taking place.

[00:15:01] Inflation and Interest Rate Expectations
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James Mintert: So, uh, we asked a couple of questions that we’ve asked in the past, uh, just to kind of get a grip on where people are at with respect to both, uh, inflation and interest rates. So this question was, what do you expect the rate of inflation for consumer items to be during the next 12 months? And, you know, we, because it’s a phone survey, we ask, we give people buckets to choose from, and the buckets were 0 to 2%. Two to three percent, three to four, and then four percent or more.

And Michael, when I look at the, the results, uh, there’s about three fourths of the people in the survey who think that inflation is gonna exceed the Fed’s target rate of two percent. So, you know, 33 percent of the surveys chose two to three percent, 19 percent chose three to four, uh, 21 percent chose four percent or more.

Uh, you add all that up, and you’re approaching three fourths of the people in the survey think that, uh, we’re going to exceed the Fed’s target rate for inflation. And that kind of speaks to a little bit about the concerns with respect to cost of production and agriculture, right?

Michael Langemeier: Definitely, and we didn’t ask the prices paid question. We’re going to probably add that in future months. But I think one of the reasons why their biggest concern is input costs is exactly what we’re talking about here. Uh, you know, 4%, 4 percent or more, 21 percent said 4 percent or more. 4 percent or more. pretty high increase in prices. If you look at the last 30 years.

James Mintert: Yeah. You start compounding that, that adds up in a hurry, right?

Uh, interest rates, a little bit of a change here. Uh, what do you expect the U.S. prime interest rate to be one year from now? And we ask people that to respond to that relative to what rates are today. So the buckets they can choose from are no change, obviously. 0 to 1 percent lower, or 1 to 2 percent lower, and then on the upside, 0 to 1 percent higher, 1 to 2 percent higher.

Um, a lot of uncertainty there. A little bit of a shift since the last time we asked this question, which I think was in August, Michael. So, people are not quite as optimistic that rates are headed lower. Is that correct?

Michael Langemeier: I, I, I, I would agree with them, uh, but let’s talk a little bit about the results here. Uh, 46 percent said they expected a decline, uh, in interest rates from the current level. When we asked this in August, it was right at 60%, uh, and so certainly there’s less people expected decline. And I think they’re right. Uh, you know, you know, there’s a lot of uncertainty with respect to interest rate policy right now because, uh, we’re not exactly sure, uh, what, what, what the economy’s going to look like.

James Mintert: Yeah, and of course, uh, this came after the survey, obviously, but just yesterday, uh, Jerome Powell, the Fed Chair, basically said interest rates probably aren’t going to change, at least in the short run, right?

Michael Langemeier: Yeah.

James Mintert: And there’s still a chance we could see some lower rates down the road here in 2025, but he didn’t sound like he was pointing too hard towards that.

Michael Langemeier: Yeah.

[00:17:47] Conclusion and Resources
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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 agbarometer. And of course you’re already listening to the podcast. So if you’re not a subscriber to the podcast, we’d encourage you to do that on your favorite podcast provider. And so on behalf of the Center for Commercial Agriculture, I’m James Mintert, thanks for joining us.