Farmer sentiment dips in February

The Purdue University/CME Group Ag Economy Barometer dipped 5 points to a reading of 125 in February. Farmers’ perspectives regarding both current conditions on their farms and expectations for the future also weakened. The Index of Current Conditions fell 2 points to 134 and the Index of Future Expectations declined 6 points to 121. The Ag Economy Barometer is calculated each month from 400 U.S. agricultural producers’ responses to a telephone survey. This month’s survey was conducted February 13-17.

“Increased concern over the risk of falling output prices, rising interest rates and uncertainty over the future growth of U.S. agricultural exports is weighing on producers’ minds,” said James Mintert, the barometer’s principal investigator and director of Purdue’s Center for Commercial Agriculture.

Producers’ expectations for their farms’ financial performance in 2023 compared to 2022 weakened in February. The Farm Financial Performance Index declined 7 points to a reading of 86. Farmers continue to point to concerns about higher input costs (38% of respondents), rising interest rates (24% of respondents) and lower output prices (18% of respondents) as their biggest concern for the year ahead.

Agricultural exports have been a key source of growth for U.S. agriculture for decades. Beginning in 2019, the Ag Economy Barometer survey routinely included a question asking producers about their expectations for agricultural exports in the upcoming five years. Since peaking in 2020, when just over 70% of respondents said they expected exports to increase in the upcoming five years, the percentage of farmers looking for exports to grow over time has drifted lower. In February just 33% of survey respondents said they expect exports to increase, which leads Mintert to suggest that a lack of confidence in future agricultural export growth is contributing to weakened sentiment among producers.

Despite strong farm income, the February reading of the Farm Capital Investment Index changed little, rising 1 point to a reading of 43. This month 72% of producers said it is a “bad time” to make large investments in their farming operation, while just 15% reported it is a “good time” to make such investments. The disparity between producers’ responses to the question and actual farm equipment sales continues to be focused on costs. Of those who said now is a “bad time” to make large investments, 45% of respondents said it was because of an increase in prices for farm machinery and new construction, while 27% of respondents said it was because of “rising interest rates.”

Producers’ expectations for short-term and long-term farmland values fell in February but remain positive. The Short-Term Farmland Value Index declined 1 point to 119 while the Long-Term Farmland Value Index dropped 5 points to 137. Although both indices remain above 100, indicating a positive outlook on farmland values, the percentage of producers who said they expect values to decline over the next five years reached 19% this month, the highest percentage since this question was first routinely included in barometer surveys in 2019. Still, over half (56%) of respondents expect values five years from now to be higher than today. This month just 33% of respondents said they expect values to rise in the next 12 months, while 14% said they expect values to weaken.

Each February, the barometer survey includes a question focused on farm growth, asking respondents about the annual growth rate they expect for their farm over the next five years. This year 49% of respondents said their farm either had “No plans to grow” (33%) or “Plan to exit or retire” (16%). Of those respondents who expect their farms to grow, 19% expect it to grow by “Less than 5% annually,” and 22% said they expect it to grow by “5% to 10% annually.”

Leasing of farmland for solar energy production is a hot topic in many parts of the U.S. Since the spring of 2021, the barometer survey has periodically included questions about the discussions farmers are having with solar companies. In both the January and February 2023 surveys, just over 10% of respondents said they had discussed a solar lease with a company. Of those who indicated they had been in discussions, nearly half (48%) of respondents said they were offered a lease rate above $1,000 per acre, up from a low of 27% and a high of 35% in previous surveys. This month’s survey findings suggest companies have started to increase lease rates they are willing to pay.

Read the full Ag Economy Barometer report at https://purdue.ag/agbarometer. The site also offers additional resources – such as past reports, charts and survey methodology – and a form to sign up for monthly barometer email updates and webinars.

Each month, the Purdue Center for Commercial Agriculture provides a short video analysis of the barometer results, available at https://purdue.ag/barometervideo. For more information, check out the “Purdue Commercial AgCast” podcast available at https://purdue.ag/agcast, which includes a detailed breakdown of each month’s barometer and a discussion of recent agricultural news that affects farmers.

The Ag Economy Barometer, Index of Current Conditions and Index of Future Expectations are available on the Bloomberg Terminal under the following ticker symbols: AGECBARO, AGECCURC and AGECFTEX.

About the Purdue University Center for Commercial Agriculture

The Center for Commercial Agriculture was founded in 2011 to provide professional development and educational programs for farmers. Housed within Purdue University’s Department of Agricultural Economics, the center’s faculty and staff develop and execute research and educational programs that address the different needs of managing in today’s business environment.

About CME Group

As the world’s leading and most diverse derivatives marketplace, CME Group (www.cmegroup.com) enables clients to trade futures, options, cash and OTC markets, optimize portfolios, and analyze data – empowering market participants worldwide to efficiently manage risk and capture opportunities. CME Group exchanges offer the widest range of global benchmark products across all major asset classes based on interest rates, equity indexes, foreign exchange, energy, agricultural products and metals. The company offers futures and options on futures trading through the CME Globex® platform, fixed income trading via BrokerTec and foreign exchange trading on the EBS platform. In addition, it operates one of the world’s leading central counterparty clearing providers, CME Clearing. With a range of pre- and post-trade products and services underpinning the entire lifecycle of a trade, CME Group also offers optimization and reconciliation services through TriOptima, and trade processing services through Traiana.

CME Group, the Globe logo, CME, Chicago Mercantile Exchange, Globex, and E-mini are trademarks of Chicago Mercantile Exchange Inc. CBOT and Chicago Board of Trade are trademarks of Board of Trade of the City of Chicago, Inc. NYMEX, New York Mercantile Exchange and ClearPort are trademarks of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. BrokerTec, EBS, TriOptima, and Traiana are trademarks of BrokerTec Europe LTD, EBS Group LTD, TriOptima AB, and Traiana, Inc., respectively. Dow Jones, Dow Jones Industrial Average, S&P 500, and S&P are service and/or trademarks of Dow Jones Trademark Holdings LLC, Standard & Poor’s Financial Services LLC and S&P/Dow Jones Indices LLC, as the case may be, and have been licensed for use by Chicago Mercantile Exchange Inc. All other trademarks are the property of their respective owners.