The Purdue University/CME Group Ag Economy Barometer dropped 7 points in January to a reading of 167. While the Index of Current Conditions remained relatively flat, down 3 points to a reading of 199; the Index of Future Expectations fell 10 points to a reading of 151. Since its peak in October of 2020, the Ag Economy Barometer has fallen 9 percent, all attributable to weaker expectations for the future.
The Index of Future Expectations has fallen 19 percent since October, while the Index of Current Conditions rose 12 percent over the same time period. 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 from January 18-22, 2021.
“The ongoing strength in the Current Conditions Index appears to be driven by the ongoing rally in crop prices, while the deterioration in the Futures Expectations Index seems to be motivated by longer-run concerns about policies that could impact U.S. agriculture in the future,” said James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.
Producers are becoming more optimistic about short-term expectations for their farms’ financial performance, with nearly one-third expecting better financial performance in the coming year compared to 2020. When asked about the size of their operating loan, 17 percent of respondents expect their loan to increase this year and, of those, 20 percent said the increased loan is due to carrying over unpaid operating debt from the previous year. This implies that 3 percent to 4 percent of those surveyed are suffering financial stress; however, that is down from 5-6% of farms identified as suffering financial stress one year ago.
Producers continue to think now is a relatively good time to make large investments in their farming operations. The Farm Capital Investment Index held strong at its record high of 93 for the past two months. The percentage of farmers expecting to increase their machinery purchases also held at its highest level over the last year of 15 percent in January.
Farmers also remained bullish about short-term farmland values and cash rental rates. In January, 43 percent of respondents said they expect farmland values to rise over the next year (up 8 points from December) and 27 percent of respondents said they expect cash rental rates to rise in 2021 (up 9 points from last month).
Farmers’ weakening expectations for the future appear to be motivated by concerns about several policy issues. Confidence that the on-going trade dispute with China will ultimately be resolved in a way that favors U.S. agriculture has waned, falling 12 points in January to 38 percent. There is also concern about possible changes in environmental policies with 83 percent of respondents expecting more restrictive regulations under the new administration (up 42 points since October). Lastly, approximately 73 percent and 75 percent, respectively, expect higher estate and income taxes over the next five years, compared to 35 percent and 40 percent who felt that way in October.
Interest in capturing carbon on farms that agree to follow specified production practices has increased as several firms have begun offering contracts to farmers. To learn more about this, the January barometer survey included questions related to carbon capture. Thirty percent of respondents to the January survey said they are aware of opportunities to receive a payment for capturing carbon. Interestingly, among the 30 percent aware of these opportunities, 22 percent said they have actively engaged in discussions about receiving a carbon capture payment. This implies that 6 to 7 percent of the farmers in the January survey have given consideration to contractually sequestering carbon.
Finally, to better understand the farming community’s perspective on receiving the COVID-19 vaccine, the barometer survey has been asking respondents since October, whether they plan to get the vaccine. Possible responses included, “Yes, as soon as possible;” “Yes, but not right away;” and “No.” Interest in being vaccinated quickly has been trending up since October. In January, 58 percent said they plan to get vaccinated as soon as possible, up from 39 percent in December, 36 percent in November, and 24 percent in October.
Read the full Ag Economy Barometer report here. 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.