AgCast 218: Farmer Sentiment Is Falling Amid Higher Input Costs

Audio Transcript:

[00:00:00] Why Farmer Sentiment Dropped in April
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Joana Colussi: Welcome to Purdue Commercial AgCast. I am Joana Colussi, research assistant professor in agriculture economics, and I’m here with Michael Langemeier, professor and director of Purdue Center for Commercial Agriculture.

Today, we are talking about the results of the April 2026 Purdue University-CME Group Ag Economy Barometer. Each month, we surveyed 400 farmers across the United States to get a sense of how they are feeling about the ag economy. This month’s survey was conducted from April 13 to April 17.

Before we get started, as always, please like this video, subscribe to the channel, and turn on notifications so you don’t miss future episodes.

[00:00:55] April 2026 Ag Economy Barometer: Key Results
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Joana Colussi: So let’s look at the results from the Ag Economy Barometer. Farmer sentiment decreased from 127 points in March to 121 in April. And unlike last month, the both Current Conditions Index and the Future Expectations Index moved lower. The Current Conditions Index fell by 11 points, while the Future Expectation Index was down four, points. The Future Expectation Index was 16 points down last December and 26 points below last April.

[00:01:34] Input Costs & Fertilizer Prices Driving Concern
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Joana Colussi: Michael, what do you think is driving this change from April, from March to April?

Michael Langemeier: I think the primary driver is input costs. I mean, if you look at fertilizer prices for nitrogen, for example, nitrogen price, if you look at April 2025 to April 2026 is up 42%, and that increased from Marc- from March this year to April this year, and so that’s certainly contributed. In fact, 46%, indicated that input costs were their biggest concern. That was the same as last month. But there was an uptick in the percentage that were worried about input availability.

That was 11% of, of the people had that as, as their biggest concern. That moved up to 14%. And so I, I think what’s going on with, with fertilizer and energy was a big part of the, of the drop, in the overall index and certainly, the drop in the index of current conditions.

[00:02:27] Iran Conflict Impact on Farm Income & Costs
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Joana Colussi: And related to that, this month’s survey asked farmers about the potential impact of the Iran conflict on the net farm income and corn break-even prices in 2026, and there is a direct relation with fertilizers.

About t- Two-thirds of respondents said they expect their net farm income to decline because of the conflict. And for the farmers in our survey that, who planted corn in 2025, over 70% of the respondents, 14%, expected break-even prices to increase 6 to 9%, and 38% expect break, break-even prices to increase 10% or more.

Michael, these numbers really suggest that farmers are concerned about how the conflict will affect their operations, right?

Michael Langemeier: Yeah, certainly we expected a, a, that the net farm income would, would have a neg- would have a negative impact on the net farm income. It’s always, it’s always hard to determine what exactly percentage would say, it’s gonna have a negative effect, but I, as you indicated, two-thirds is a rather large number.

[00:03:36] Why Break-Even Prices Are Rising in 2026
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Michael Langemeier: What was a little surprising when we asked the question about break-even prices to those that have corn, which by the way is about three-fourths of the sample, this month, 53% of the sample are, are primarily corn and soybean producers, but, there’s a larger group that grows corn, close to three-fourths, and so that was a pretty substantial group of, of, of respondents. That’s about 300 respondents to that question.

I was a little surprised that, that, 37, 38%, thought their break-evens would go up 10% or more. That’s a large shift in the break even. There’s no wonder, there’s a drop in the Index of Current Conditions if they’re expecting that large of impact on, on, on corn break-even price.

Joana Colussi: Yeah, we didn’t ask specifically about- fertilizers- Yeah … but that’s likely a big part of- Yes … what, farmers have in mind. Yeah. Michael, how does the current fertilizer situation actually compare to 2022, especially in terms of, price and cost production? We know that time- Yeah between the Russia, and Ukraine conflict, the situation was different in terms of price.

Michael Langemeier: Well, if you look at anhydrous, like I said, it’s up 42% year to year. And it, it’s approaching levels that we saw back in ’22. It’s not quite there yet. Anhydrous, got up to $1,500 or slightly more, in, in ’22, and it’s, it’s sitting about 1,150 right now, $1,150 per ton. Certainly a very large increase, but it’s not quite at the ’22 levels.

What’s differs this time around is, is, is there hasn’t been as much impact, on, on P and K, this time around. The, the Iran conflict has really had a large impact on anhydrous and urea. The impact on phosphorus and potassium, has, has been relatively smaller.

If you look at, year to year increases in P and K, P is up 15%, most of that not due to the Iran conflict, but it’s still up. And, and, and K is up 8%, and so, you combine all of those increases and, and you can see why, people are expecting their break even to change quite a bit, this year.

Joana Colussi: Especially for corn, that’s heavily-

Michael Langemeier: Particularly for corn … dependent. Less impact on soybeans, but that’s why I mentioned P and K. It, it’s still gonna have a… we’re still gonna see, soybean break even prices higher this year, than last year because of fertilizer price increases.

[00:05:51] Crop vs Livestock Outlook: Gap Widens
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Joana Colussi: Yeah. And if you look at the results, we continue to see a large gap in expectations between crop and livestock producers, and fertilizers, help to explain that.

According to the survey, only 31% of respondents expected good times for crop producers over the next five years, while 69% expected good times for livestock producers. So there is a gap, uh, between the sentiment when you compare, right?

Michael Langemeier: Yeah, this is about the largest gap we’ve seen, but it has been running about at least 30-point difference, between crop and livestock.

But, as you noted with the numbers, it’s close to a 40-point, difference this time, and it just reflects the fact that the, the beef industry in particular, cow-calf, sector o- of the beef industry in particular, is doing quite well, where most of the crop producers are not doing very well.

Very tight margins before, the Iran co- conflict, and it’s safe to say, they’ve gotten even, you know, even, even tighter.

Joana Colussi: Yeah, and we have seen that since last year- Yes … now become more and more. Yeah.

[00:06:55] Why Farmers Are Pulling Back on Investments
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Joana Colussi: So let’s turn to the Farm Capital Investment Index, which dropped by nine points to 44, reaching the- its lowest value since October 2024. Michael, what is behind these numbers?

Michael Langemeier: I think the, the fact that the in- the Index of Current Conditions dropped so sharply, is related to the drop in, in the Farm Capital Investment Index. We’ve talked about this in previous, previous AgCast, but when you look at cash flow, farmers typically try to cover operator withdrawals and, and repay debt before, they cover new, new purchases, down payments, for new machines, and down payments on buildings.

And because the cash flow is even tighter, in April than it wa- it has been in previous months, there’s just not a lot of room, a lot of cash flow left, to buy machinery and, and, and therefore, the index dropped rather sharply. And as you indicated, this was before the, the ’24 election, so this is a big deal. That index did increase a little bit. Now it’s down- it’s back down, below what it was before the ’24 election.

Joana Colussi: Yeah, and we are in April. Do you see any room that situation could change still in 2026?

It just depends on how long this Iran conflict lasts. I think if you did see some mitigation in the input cost, that would help a little bit. I, I just don’t see anything changing prices, at least right now, that would necessarily, cause it to increase. But who knows? I mean, there’s a long time between now and, and harvest and- And if we have drought and any, any, negative impact on supply, price could respond and, and that certainly could change, the, the, the prospects, for buying, machinery and buildings later this year. Yeah. Well, let’s see. Continue wa- watching.

[00:08:38] Are Farms Truly Low-Cost Producers?
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Joana Colussi: And from time to time, the monthly survey includes questions about a farm’s competitive position and its ability to manage strategic risk. This month’s survey asked respondents how strongly they agreed or disagreed with the following statement: We have low per unit fixed costs relative to our most efficient competitors.

And, about 58% of the respondents agreed with this statement, with 9% indicating that they strongly agreed. Michael, how the low per unit fixed costs help explain a farmer’s ability to manage strategic risk?

Michael Langemeier: Well, when you talk about strategic risk, you’re talking about your competitive position changing, and so we wanted to ask a question related to one of their major strategies, which is probably being a low-cost producer. Another major strategy is product differentiation, adding value to your products. But when we ask people, as we have in the past, you know, what is their major strategy, usually it’s to be a low-cost per- low, per unit cost producer, and so that’s where this question emanates from.

At first glance, I was a little surprised that there was that large a group that thought their, their per unit costs were relatively low. Related to competitors. But then I have to remind myself is we only survey full-time farms.

Joana Colussi: Mm-hmm.

Michael Langemeier: From an economies of scale standpoint, when you look at fixed costs, you would expect, full-time farms to have lower per unit costs than part-time farms. And, but there, but, but, yeah, even though there was 57, 58% that agreed with that statement, it’s important to point out that there’s 40% that did not.

And so certainly if they’re in that 40%, this is the time to really, to, to really bump up, their bench- their benchmarking efforts, bump up their, their development of crop budgets, and really try to manage costs, you know, better than they perhaps in, they have in the past. Because, as we’ve said, margins are tight. And they’re particularly tight if, if, if you’re not a low-cost producer. And so this is something we always have to, always have to keep our eye on.

Joana Colussi: Yeah, especially in commodity markets. Yes. We know that, to keep competitive, you should keep your per unit cost very low.

[00:10:51] Farmland Values: What’s Driving the Outlook
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Joana Colussi: And the Short-Term Farmland Value Expectations Index also decreased in April from 125 to 120-

Michael Langemeier: One

Joana Colussi: One, just to be sure. And the Long-Term Index declined as well from 159 in March to 155 in April. Alternative investments, interest rates, and inflation were mentioned as the three factors having the biggest influence on farmland values. Michael, both index, increased in March and then moved lower in April. What do you think explain that change?

Michael Langemeier: I think th- these are very consistent with the drops in the Index of Current Conditions and the drop in the Index of Future Expectations. Usually, when you see, weakness in, in both of those indices, you see weakness in, in, both short-term and long-term values.

It is important to point out, particularly though with the Short-Term Index, it’s still quite a bit higher than what it was last summer. And so that, that’s interesting to me. There’s still a lot of… That tells me there’s still a lot of confidence, in, in the land market. You know, even with the tight margins, there’s a lot of confidence in the land market, and that, that’s why we ask that factors question.

We don’t, we don’t know if those factors are, are negative or positive. I would think the net farm income factor is negative right now. The interest rates is probably neutral. Inflation is probably positive right now, and alternative investments is positive. But that’s why we ask that question, is, is why do they think that there’s gonna be, you know, stable or, or, or strong land values moving forward?

And that alternative investments, it has been the largest factor every month for the last- Yeah … several months. And so, and so at least the p- is there perception, by the, by the people we survey, that there’s still a lot of interest from outside investors in, in, in the land market.

Joana Colussi: Yeah, because actually land is a very strong asset- Yes. Even though it’s not for farmland- Yes … or other business. Yeah. Yes.

[00:12:47] Are Farmers Losing Confidence in the Economy?
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Joana Colussi: So, and as in the last few months, farmers were asked in the survey whether the things in the U.S. today are generally headed in the right direction or on the wrong track. The percentage of producers who indicated that the U.S. is headed in the right direction decreased from 65% in March to 57% in April. Michael, this result is consistent with the decline we saw across the other indexes this month, right?

Michael Langemeier: I wasn’t sure it would be quite this large, but yeah, it’s definitely consistent.

[00:13:22] Farm Growth Expectations Shift Lower
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Michael Langemeier: And we didn’t talk about farm growth, but we actually asked about farm growth in this month’s survey, and unlike previous times when we asked about farm growth, there was a larger percentage that were not gonna grow. It was over 60%, that expect either no growth or expect to actually decline, in the next five years. And, when you look at those that h- that, that are looking at no growth, they’re particularly pessimistic about the long-run environment. Their p- their percentage, the percentage of those folks that say we’re heading in the right direction, is closer to 50%.

And so you’ve got a dichotomy here. There’s still some people that are fairly optimistic, in what I call the long-run policy environment, which this question would reflect, but there seems to be a growing group of people that are not. And I think we also saw that in some of the comments, Joanna.

[00:14:11] Final Takeaways: What Farmers Should Watch
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Michael Langemeier: There’s just more concerns about, about geopolitical risk, about, about input costs, a- and a lot of different things, that it makes that long, lo- the long-run policy environment, you know, less clear.

Joana Colussi: We didn’t touch it, but we also have the result related to the exports- Yeah … what they expect- Yeah … in terms of exports will increase or decrease. This year, actually, so far, we don’t have the tariffs. Yes. So we should have a better year in terms of- Yes … Chinese relationships, so.

Michael Langemeier: Yeah, we will have to see, and perhaps we, we will add a question on exports here to upcoming surveys to try to capture- what the possible impact of, of reduction in tariffs, will be.

Joana Colussi: Yeah. So, and those are the key highlights from this month’s survey.

Thank you so much, Michael.

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