Farmer sentiment worsened in June; the Purdue University-CME Group Ag Economy Barometer reading of 105 was three points less than a month earlier. A five-point decline in the Index of Future Expectations to 112 was responsible for the overall sentiment decline. The June Current Conditions Index of 90 was one point better the May index value. Inflated input costs and the risk of reduced prices for the products they produce continue to weigh on farmer sentiment, along with concerns about increasing interest rates. This month’s Ag Economy Barometer survey was conducted June 17-21.
The Farm Financial Performance Index increased three points in June to a reading of 85. There’s been a tendency in recent years for producer financial-performance expectations to worsen in spring and improve as the spring crop-growing season progresses. This year seems to be following that pattern; the index has increased nine points during the past two months. Producer farm-financial expectations improved in 2023 from spring into summer, and then again from summer into fall. The index’s improvement in 2023 was driven by improving revenue expectations based on good crop yields and a fall price rally. It remains to be seen if those conditions will be repeated in 2024.
The capital-investment outlook weakened slightly in June; the Farm Capital Investment Index decreased three points to a reading of 32, which leaves the index just one point more than its all-time worst number. More producers this month said now is a bad time to make large investments than in May, with no change in the percentage of producers who said it’s a good time to invest. Interest-rate concerns appear to be affecting farmer investment outlook. During the past several months the percentage of producers citing increasing interest rates as an important concern for their farm operations has been increasing. In February there were 18 percent of survey respondents who chose increasing interest rates as a concern. That percentage has been increasing every month since then, reaching 23 percent in the June survey.
The Short-Term Farmland Value Expectations Index reading in June of 115 was unchanged from a month earlier. But producer longer-term outlook concerning farmland values did shift; the Long-Term Farmland Values Index value of 152 was seven points less than May’s reading. Fewer producers this month said they expect farmland values to increase during the next five years, with a concurrent increase in the percentage of producers who think values will remain unchanged. Among those producers who expect a long-term increase in farmland values, most respondents continue to point to non-farm-investor demand as a key driver, followed by inflation – which was chosen by 16 percent of respondents. June marked the third month the survey instrument included “Energy Production” as a possible driver of farmland values; this month 10 percent of respondents with a bullish outlook chose it as a key factor.
Once again this month’s survey asked respondents if they or one of their landowners had been approached about a possible Carbon Capture and Storage project from an ethanol plant. This month 8 percent of respondents said they had been in contact about a Carbon Capture and Storage project. The vast majority of respondents who had contact with a company about a project reported that payment rates offered were less than $25 per acre, with just 8 percent of producers reporting payment-rate offers of $50 or more per acre.
Click here to see more...