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Audio Transcript

James Mintert: Welcome to Purdue Commercial Ag, the Purdue University Center for Commercial Agriculture’s podcast featuring farm management news and information. I’m your host today, James Mintert, Emeritus Professor of Agricultural Economics here 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 a professor of ag economics here at Purdue.

We’re gonna review the results from the August 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 11th through the 15th of August.

And Michael,

[00:00:48] Overview of Ag Barometer Results
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James Mintert: the Ag Economy Barometer Index fell a little bit this month. It fell 10 points to 125. And that leaves the barometer down 33 points from its peak in 2025, which was set back in May, at an index reading of 158. And then if you look underneath the barometer at the Current Condition Index and the Future Expectation Index, Current Condition Index was hardly changed at all. I think it actually, actually up two points to 129, but that Current Condition Index is down 17 points from its 2025 peak, which is also set at 146 back in May. And the Future Expectation Index was down 16 points to 123. It’s down 41 points from its 2025 peak, also set in May.

So the driver of the decline in the barometer was really future expectations. Current conditions really didn’t contribute anything to the change. It was really less optimistic about the future. How about you? Were you surprised by these results?

Michael Langemeier: Yes, I was surprised. I was surprised that the Index of Future Expectations fell as much as it did. Uh, usually I, I, I indicate that that’s related to policy environment, long-term policy environment, and, and I don’t, I don’t really see exactly what they were pointing at here.

Uh, but one of the ways to possibly explain that is, uh, you know, ’25 is gonna be a low net return for crop producers. And, you know, and, and over two thirds of the, the people we survey are crop producers. Maybe this is telling us that, that they don’t think this is necessarily gonna be just ’25, that this is gonna continue.

And if you look at futures prices for corn, for example, they’re not very high going one year out and two years out.

James Mintert: Yeah, that’s a good point. I think it is more of a long-term expectation and for me, the surprise this month was that we didn’t see some more weakness show up in the Current Condition Index.

Michael Langemeier: Yeah.

James Mintert: Um, you know, maybe I was prevented by the fact that there was some optimism related to the size of the crop. Big crop coming on, uh, but corresponding with weak prices. So, um, kind of an interesting result. And, and of course, our survey this month was done the week that the August crop report was issued.

So, um, at least by the middle of the week, people knew what USDA was suggesting the crop size was gonna be. So that was embedded in most of these response, or at least quite a few of them.

Michael Langemeier: Another thing that, uh, that, uh, I, I, I spent quite a bit of time looking at and, and they’re virtually the same, they’re probably not statistically different, but this is the first time in a long time, probably two years, that the Index of Future Expectations below the Index of Current Conditions.

And that to me is telling, that’s why I go back to that story, that it, it tells me that they, they expect that this, uh, these low net return, particularly for crop, probably be with us for awhile.

James Mintert: Yeah, that, that’s a good point. Um, you know, if you look at one of the things that was going on in the index, and I think some people have been surprised that, for example, the barometer hasn’t fallen more sharply than it has, is that there’s a big disparity in the perspectives on crops and livestock.

So, you know, the crop in livestock sector, much different level of profitability, a lot more optimism in the livestock side than there is in the crop side. When you look at the question that we pose every month over the next five years, are widespread good times or bad times more likely. You can really see that. In the livestock side, 67%, uh, are saying good times in livestock, but only 24% on the crop side, and that crop side number has fallen sharply as we’ve headed through 2025.

So I that kind of helps explain what’s going on, don’t you think?

Michael Langemeier: I think it definitely helps explain that Index of Current Conditions, you know, you as you thought, you thought it would drop a little bit more. Well, I think part of it is the livestock’s holding it up and uh, and uh, you know, uh, we, we did actually calculate the, a economy barometer for crop and livestock producers separately.

And, uh, uh, and, and livestock was definitely higher index than the crop.

James Mintert: Yeah.

[00:04:39] Farm Financial Performance & Investments
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James Mintert: Farm Financial Performance Index was virtually unchanged, but it actually rose one point to 91. But the key point is it’s, it’s well below 100.

And as you look at it, uh, over the course of 2025, it’s down 20 points from its 2025 peak of 111. Uh. Uh, back in, in January. So you’re looking ahead. People do expect weaker financial performance on their farm in the upcoming year. Any surprise there?

Michael Langemeier: Not really. And, and, and one, it’s hard to, it’s hard to, uh, really, uh, tell what they’re, what they’re, what they’re thinking about when they do the Financial Performance Index.

I think in terms of accrual, but they’re probably thinking in terms of cash. Uh, and one of the, one of the issues we’re having, we’re gonna have with the ’25- ’26 crop is we’re probably looking at an ARC county pay payment. That’s pretty sizable, but that’s not gonna come until October 26. And so that’s really hurting the cash flow, uh, for ’25.

James Mintert: Yeah, that’s a good point.

Michael Langemeier: And I think that’s part of what might be going into this index.

James Mintert: Yeah, that’s a good point.

Michael Langemeier: You just look at crop revenue, they’re gonna be low this year.

James Mintert: So Farm Capital Investment Index rose eight points to 61. And Michael, I have to say, if there’s a surprise on the survey, a big one, this is probably it.

Michael Langemeier: Definitely.

James Mintert: Uh, the index, uh, reading really matches the highest reading of 2025, which was set back in April.

So, um. Again, we kind of wind up falling back on this idea that, that maybe the livestock sector is kind of boosting this. That’s really my best explanation for this. There’s some other op opportunities, obviously with respect to maybe getting a better deal on things like farm machinery. But, uh, you know, and if you look at the underlying question, uh, do you think now is a good time or a bad time to buy items like, uh, buildings and, and farm machinery. Um, bad times percentage fell five points to 62. While good time percentage rose three points to 23. And so mechanically, that’s why the index did what it did. But it’s a little hard to understand what was driving that change in August versus what we saw in July.

Michael Langemeier: This has been a bit of a head scratcher, and I thought for a while there, maybe it was followed ’cause the Index of Future Expectations was relatively high.

Uh, this, this was relatively high since essentially the election. Uh, and so there’s an, there’s a gap there between what the Capital Investment Index was before, uh, the ’24 election and after the ’24 election. And there’s certainly, uh, they’re not that they’re necessarily enthused about buying, uh, you know, uh, buying machinery and, and, and investing in buildings, but it’s certainly higher, uh, that Capital Investment Index since the election.

James Mintert: Yeah, I mean, if you look at this question and, and for those of you that download the charts or take a look at the charts, it’s interesting to look at this. Go back a year ago. And a year ago, the percentages said a bad time to make investments was around 80%.

And a year ago, the percentage saying that it was a good time was around 10% and. Both of those have gone the other direction over the last 12 months. And I, from my perspective and yours, other than the livestock sector, uh, explanation, we’re kind of scratching our heads with respect to why that, why people are responding that way. But it’s pretty consistent. It’s not a one month off kind of a, a response.

[00:07:48] Farmland Value & Cash Rent Expectations
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James Mintert: Uh, the Short -Term Farmland Value Expectation Index at 112, was three points lower than a month earlier, and that leaves it, I think, 12 points lower than its highest reading of 2025, which was, uh, back set back in May at a, at a reading of 124.

So, you know, if you look at the chart, people are still saying that they’re, uh, more optimistic that the farmland values will increase on average than decrease, but the level of optimism is eroding.

Michael Langemeier: It. It definitely is. I mean, just, uh, three months ago we were at 124. Now we’re down to to 112. So that, that’s a pretty big drop.

James Mintert: Yeah, that’s, that’s sort of my perspective. You know, if you go back this time last year, it was more negative than that. This time last year, we actually had a reading below 100. So, from that perspective, people are a little more optimistic than they were in August of 2024, which is a little surprising, don’t you think?

Michael Langemeier: Yes, yes it is. Uh, but, but. I think, I think the results we’re getting here are consistent with some of the surveys, you know, survey results that we’ve seen. Uh, the survey results are, are either slightly negative or slightly positive, uh, with probably more on the, on the po, on the slightly positive side. Uh, and so I think that’s consistent with what we’re finding, uh, in this survey.

James Mintert: So I think you, you just looked at the Indiana results for the state level average. It was up,

Michael Langemeier: it was up about 5% for average. And, and moreover, uh, if you look at, uh, uh, the June, uh, ’25 number compared to the December ’25 number, the average is up 4%.

James Mintert: Okay. And if you look at some other states, for example,

Michael Langemeier: Iowa is a little weaker than that.

But, uh, uh, as we said on the Land Value Podcast, uh, uh, Iowa tends to be a little bit more dynamic, meaning they, they increase a little faster and then they decrease a little faster. And so, and so Iowa responds more, uh, to, to negative. or, or low net returns.

James Mintert: And what about Illinois?

Michael Langemeier: Illinois is, is, is in the middle. They’re very, you know, very stable.

James Mintert: So yeah. So in that context, maybe our short term index is, is actually representative of what’s going on. But I think the, the key point to me anyway is the fact that we’re, we’re losing confidence.

Michael Langemeier: Yes.

James Mintert: We’re still, I would characterize it, I have for several months now as being cautiously optimistic, but it’s, it’s becoming less and less optimistic.

Michael Langemeier: And one of the reason we’re dwelling on this is we did ask some questions related to financial stress and strength of the balance sheet. Obviously this question’s extremely important, uh, to that topic.

James Mintert: Yeah. And, and I guess looking underneath the, the index and looking at the raw responses to the question that the index is based on, the driver here is the fact that we’re seeing more people say that they think farmland values could weaken over the next year.

I, a month ago it was 14%. It felt that way. This month it was 17%. That’s not as high as it’s been. You go back this time last year, that index or that response rate, we had up around 25% saying they thought values could go lower. So it’ll be interesting to see if that that red line on the chart continues to increase, uh, going forward.

Um, second month in a row, we asked people about their expectations for cash rental rates in 2026 in their part of the country. Um, results were almost identical to what we got a month ago. Three fourths of the producers this month said they expect cash rental rates to remain about the same in 2026 as they were in 2025.

And just 12% of crop producers expect runner rates to fall. And, you know, if you think about it. Maybe that’s one of the things that would be supportive of land values, right? If

Michael Langemeier: definitely

James Mintert: if cash, rent rates hold up.

Michael Langemeier: I, I, there’s two things there. Cash, rent, uh, value cash rents seem to be holding up or steady.

It’s probably increasing, uh, at lower than inflation rate. So even if it’s positive, it’s probably lower than the inflation rate. Really small, uh, small increases we’ve seen recently consistent with about the same. Uh, but the other thing is, is we, as we’re expecting a maybe a decline in interest rates, that’s also helpful, uh, for land values.

James Mintert: It remains to be seen what happens in interest rates.

Michael Langemeier: Yeah.

James Mintert: We could discuss that for an extended period.

Michael Langemeier: Yes.

James Mintert: But, uh, the Fed has more control over short term rates than long-term rates. Right. So

Michael Langemeier: The key word was expected.

James Mintert: There you go. Yeah.

[00:11:56] Ag Exports & Trade Expectations
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James Mintert: Um, you know, one of the things that’s going on with respect to the optimism has been people’s perspective on the ag trade outlook. And producers became more optimistic about the future ag trade prospects in August. Uh, the percentage expecting exports to increase over the next five years rose nine points to 52%. While the percentage expecting exports to fall fell three points to 10%. And overall, when you combine those two and, and look at it kind of from an index perspective, um, the trade outlook was the most optimistic reading of 2025. That actually is a little more optimism than we saw back in May when you put those two together.

Uh, interesting response again, and I think people are maybe responding on the day-to-day basis to some of the announcements, right?

Michael Langemeier: Yeah. It’s consistent with some of the questions we ask about, about their, their attitude towards the long run policy, uh, in the U.S. I think it’s consistent with that. We’re gonna talk about that a little bit later here.

James Mintert: Yeah, the related question we ask is, um, and this is not one we’ve asked every single month, but we’ve asked it now two months in a row. In the next five years, how likely is it that new foreign export markets will open up to American Ag Goods?

And this month, that was, I think 68% said likely, uh, last month it was 64%. Previously we’d asked this question back in ’21, uh, and in 2020. And back then the responses hovered around 60% in terms of expecting, um, uh, exports to increase over the next five years. So people are more optimistic about exports increasing, um, really thinking about new markets, right?

That’s perhaps the driver. Not so much existing customers, it’s more about new markets opening up, uh, that previously were closed.

Michael Langemeier: And so obviously they, they’re, they’re, they’re thinking that some of these renegotiations we’re having with countries are gonna be positive.

James Mintert: Yeah.

[00:13:49] Farmers’ Biggest Concerns
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James Mintert: Um, we’ve been, continue to ask people about their biggest concerns for their farming operation. No big surprise, high input cost continues to be number one, but if you look at the responses over the course of the year, you can see people becoming increasingly worried about output prices at the beginning of the year. 24% said that that was one of their top concerns. Uh, here on the most recent survey, that’s up to 30%.

Other changes, uh, a little bit of a drop with respect to the people worrying about rising interest rates. Consistent with what you just said, I think people maybe are looking for the possibility of rates coming down. That was only chosen by 12%. At the beginning of the year that was chosen by 15%. Um, there’s still one out of 10 people saying availability of of inputs is a concern, which is kind of interesting.

Michael Langemeier: Yeah, it’s very interesting. Maybe that’s partially related to things like fertilizer where we were thinking there might be some price increases here.

James Mintert: Yeah.

Michael Langemeier: But I don’t know.

James Mintert: One of the questions there is how do people interpret availability versus pricing, I suppose. But the other issue, I,

Michael Langemeier: It’ll be available. They’ll just be more expensive.

James Mintert: The other issue I was thinking about was the impact of tariffs and what that might be doing to things like farm machinery parts.

Michael Langemeier: Steel.

James Mintert: Yeah. Yeah. Um, there was a story recently about AGCO and, and their concerns because so much of their machinery is actually manufactured in Europe.

[00:15:11] Financial Stress & Balance Sheet Strength
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James Mintert: So a question that we don’t normally ask in the summer, but because of all the concerns about financial stress, especially in the crop sector, we decided to ask a question that we normally ask only in January. And that is compared to last year, do you expect the size of your farm’s operating loan to be larger, smaller, or about the same in the upcoming year?

And this month, the responses weren’t too much different than what we got in January. I think 22% said they thought they’d have a larger loan, and January was 18%. If you go back to January 2024, a little bit of a difference there. I think only 15% said they expected to have a larger loan. Um. Then as you look at the follow up question, what goes only to people who say they expect to have a larger operating loan?

Um, the percentage of producers who expect a loan sized increase, who also expect it to be because of carrying over unpaid operating debt, didn’t really change from January of this year. Both times it was 23%. But if you compare those two responses to especially January of ’23, only 5% said they expected to, uh, carry over unpaid operating debt.

And even January ’24, it was 17%. So when I look at those responses, Michael, I, I look at the odds are we are seeing an increase in stress, uh, among producers.

Michael Langemeier: I think that’s definitely the case when you combine the questions, uh, do they expect an increase in, in, uh, operating loans? And then they answer that, that the second question, the, the increases because of unpaid operating debt.

And you combine those two, uh, certainly in ’25 here, uh, the financial stress seems much larger than it was, uh, in ’23 in particular. But even higher than it was in January ’24.

James Mintert: Yeah. The, uh, it, it’s a really interesting, uh, perspective and, and it’s one that at this stage is still pretty rough in, in terms of producers, right?

Yes. It’s pretty early to be asking this question. So we’ll continue to ask this, uh, maybe not every month, but at least another time or two this fall to get an idea to where people are at. But um, yeah, it certainly suggests there’s some stress out there.

Um. And this was a question that we have not previously asked on the barometer surveys, but you’ve asked it Michael, in some previous, uh, survey work that you’ve done, and that is how strongly do you agree with the following statement, quote? We have a strong balance sheet.

And roughly one third, I think 32% of the respondents said they don’t feel like they have a strong balance sheet. They either were in the strongly disagree or disagree category, and without looking at other responses, Michael, I’ll let you comment on that. My take was that’s a lot of people who feel like they don’t have a very good balance sheet.

Michael Langemeier: Yes. That’s a lot that a lot higher than I thought it would be. Uh, if you look at, for example, I just recently did some work looking at, uh, in, in ’24, so there’s always a time lag there, but I looked at the University of Minnesota FINBIN data and the farms that have a, a really high debt to asset ratio.

It’s not one third. Uh, and so I, I was a little surprised that the percentage was that high.

James Mintert: Yeah. Um. And if you looked at, you’ve asked this question in some other surveys, how does it compare to some of those results?

Michael Langemeier: Back in April of ’23, we did a strategic risk survey, and back then, uh, there was about only 10%, uh, thought that they did not have a strong balance sheet.

We also asked this question this spring, uh, and it, it, it was not a third, it was probably closer to 25%. And so definitely, uh, those that are, that think their balance sheet has eroded, uh, the strength has eroded, uh, is increasing even this year.

James Mintert: Yeah. So you’re, and to keep it, uh, maybe a little additional clarity. When you were doing those surveys, those were using some demographics that are very similar to what we used for the barometer?

Michael Langemeier: Yes. Identical to what we used for the barometer. They just were separate surveys. The, the April, 2023 was a, uh, strategic risk survey. The February ’25 was a farm goal survey. Uh, but they, they’re, they’re asked the same demographic groups.

James Mintert: So you, in those surveys, you picked up a significant rise from ’23 to early ’25, and that was,

Michael Langemeier: And then a further, further rise here in, in late ’25.

James Mintert: Yeah. So it’ll,

Michael Langemeier: which is concerning.

James Mintert: So, we’ll, we’ll continue to monitor this, but one of the things you and I have talked about in the past is we feel like a lot of people are entering this downturn in agriculture with a strong balance sheet.

These results suggest that maybe that’s not quite as true as we think.

Michael Langemeier: Yeah. And in this statement is, is is pretty general. And so it’s, it’s hard to figure out whether they’re focusing on working capital and debt to asset ratio. And tho they’re quite different. Uh, if you look at the working capital, it’s definitely the case that we’ve drawn down working capital in the last two years.

That’s definitely, definitely been the case because it’s, it’s obvious if you have, if you have lower cash flow, you’re gonna, you’re going to, uh, go to those reserves. They working capital reserves to, to get you through to the next year. Uh, and, and so that’s pretty obvious that that’s been the case.

But I I, but, but if they’re answering this related to the long-term portion of the balance sheet, it’s even more concerning because that’s, when you talk about financial stress, you’re usually talking about high debt to asset ratio and low net returns, uh, is being financially stressed. And so, uh, and so I think we need to continue to ask this question and maybe even get, uh, get into a little more detail here, uh, in terms of the, uh, uh, short term nature of the balance sheet versus the long term.

James Mintert: Yeah, that’s a good point. Because you think about the long term aspect of the balance sheet, it’s really tied to farmland values.

Michael Langemeier: Yeah. Farmland’s been stable.

James Mintert: Yeah. Or,

Michael Langemeier: and went up a lot

James Mintert: or strengthening

Michael Langemeier: it went up a lot in ’21, ’22. So,

James Mintert: Yeah.

Michael Langemeier: And just to put that in perspective, uh, so, you know, kind of throw out a number there just to how much land values have changed. Of course, input costs and everything else has changed too. But from 2007 to 2025, looking at Indiana land values are almost triple.

James Mintert: Yeah.

Michael Langemeier: So and so, yeah, the balance, the, the long term portion of the balance sheet for a lot of people is pretty strong, but we have to remember that in, in, in, in, uh, this group and in and, uh, in general in production agriculture, not everybody has, has has the same looking balance sheet. Uh, you’ve got, if you have younger operators or operators that rent a lot of their ground, their balance sheet looks a lot weaker than someone that’s been around for 25 years and owns a third of their ground. That’s a much different looking balance sheet than someone, uh, that’s not in that situation.

So one of the things I I I, one of the things I’ve been digging at is the FINBIN data, looking at people with less experience and, and, and, and people with, uh, with high debt to asset ratios. And, and things definitely look worse for that group, but that group’s not a third. That group’s probably, probably closer to, to under 20%.

James Mintert: Yeah. Good, good point. Well, this is a topic we’re gonna focus on in future surveys ’cause it’s obviously a very important one. So.

[00:22:07] Right Track or Wrong Direction?
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James Mintert: And then the last question, we started asking this last month, I don’t know if we’re gonna do it every month or not, but we did it again this month. Would you say that things in the U.S. today are generally heading in the right direction or on the wrong track?

And last month, I think, uh, 74% of the people said right direction. Uh, 26% said wrong track this month. Those percentages changed a little, but not a lot. 69% said right direction, and 31% said wrong track. Given the nature of our survey, I’m not sure I see too much difference in those two responses. A big majority think we’re, we’re headed in the right direction. What’s your take?

Michael Langemeier: I, I don’t either. I think those are pretty much the same. Same, uh, you know, va vastly more people think we’re heading in the right direction. It’s too bad we didn’t ask this que question in hindsight, uh, before the ’24 election. I, I, I think this would’ve been reversed. I, because I, I still think this particular, the answer to this particular question is keeping that Index of Future Expectations higher than it would be otherwise.

James Mintert: Yeah.

Michael Langemeier: The fact that the policy environment, uh, you know, that’s how I interpret this long-term policy environment, uh, is people still think we’re headed in the right direction.

James Mintert: There, there’s probably a lot embedded in this. You know, it’s, it’s by definition, it’s a, it’s a very generic kind of a question. It’s one we actually borrowed from, from one of the big consumer, uh, survey, uh, polling firms. So it, it typically is used with a broader audience in this, but it, it certainly suggests, for example, in agriculture that people are still on board with the idea of using tariffs as a way to negotiate better trade deals.

Michael Langemeier: Yeah.

James Mintert: I, I, I think there’s probably more in this response than just that.

Michael Langemeier: Yes.

James Mintert: But I think that’s at least part of it.

Michael Langemeier: Yeah. I, I think also the safety net, the changes in the safety net probably are, are being incorporated here.

James Mintert: Yeah, and there’s probably some other social issues embedded as well, Michael, I suspect, uh, as a typically would be for consumers, but, so it’s interesting. We’ll, we’ll continue to monitor this question, maybe not every single month, but we’ll, we’ll continue to include it in the survey and just kind of track for what’s going on there. So.

[00:24:05] Conclusion & Resources
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James Mintert: That wraps up the highlights of this month’s survey. Uh, the full report is available on the Purdue -CME Group Ag Economy Barometer website, which is purdue.edu/agbarometer.

And of course, you can always tune into the Commercial AgCast here at Purdue for, uh, lots of information. And, and Michael mentioned earlier, uh, just did a, a podcast focused on land value changes based on the Purdue Land Value Survey. So interesting discussion to tap into on there as well. And with that, on behalf of the Center for Commercial Agriculture, my colleague Dr. Michael Langemeier,, thank you for joining us. I’m James Mintert.