Farmer sentiment reaches lowest levels since 2016 as income expectations weaken

Rhea-AI Summary

The Purdue University/CME Group Ag Economy Barometer recorded its lowest readings since March 2016 in September, with the barometer falling 12 points to 88. The Index of Future Expectations dropped 14 points to 94, while the Index of Current Conditions fell 7 points to 76. Farmers expressed increasing concerns about commodity prices, input costs, agricultural trade prospects, and the potential impact of the upcoming election on their operations.

Key findings include:

• 34% of farmers cited input prices as their primary concern
• 33% pointed to lower output prices as their main worry
• Only 26% expect agricultural exports to rise over the next five years
• 78% of producers are concerned about post-election policy changes affecting their farms
• The Farm Financial Performance Index fell to 68 in September
• The Short-Term Farmland Value Expectations Index dropped below 100 for the first time since 2020

Positive

• Cover crop usage among corn and soybean producers has increased, with 68% of users planting them on more than one-fourth of their farms
• The Farm Capital Investment Index increased by 4 points from August to a reading of 35

Negative

• Ag Economy Barometer fell 12 points to 88, its lowest level since March 2016
• Index of Future Expectations dropped 14 points to 94
• Index of Current Conditions fell 7 points to 76
• Only 26% of respondents expect agricultural exports to rise over the next five years
• Farm Financial Performance Index fell to 68 in September, down from 86 in September 2023
• Short-Term Farmland Value Expectations Index dropped by 10 points to 95, indicating more farmers expect a decline in farmland values

WEST LAFAYETTE, Ind., Oct. 1, 2024 /PRNewswire/ -- In September, the Purdue University/CME Group Ag Economy Barometer recorded its lowest readings since March 2016. Declining income expectations pushed farmer sentiment down as the barometer fell 12 points to 88, and the Index of Future Expectations dropped 14 points to 94. The Index of Current Conditions also fell 7 points to 76, which nearly matched levels seen in April 2020, during the height of COVID-19 concerns for farmers. This month's survey was conducted from Sept. 9-13, 2024.

September's survey revealed that farmers are increasingly worried about commodity prices, input costs, agricultural trade prospects and the potential impact of the upcoming election on their farm operations. When asked to identify their top concerns for the coming year, low commodity prices and high input costs were nearly tied, with 34% of farmers citing input prices and 33% pointing to lower output prices as their primary concerns. Interest rates trailed behind as a top concern for 17% of respondents. Producers' apprehensions about commodity prices matched up with their lack of confidence in the future of U.S. agricultural exports; only 26% of respondents expect exports to rise over the next five years, the most pessimistic response to this question since it was first introduced in 2019. Additionally, 78% of producers expressed concern that government policy changes following the fall 2024 elections could impact their farms.

"The continued drop in the barometer reflects deepening concerns among farmers regarding expectations for farm income in 2024 and 2025," said James Mintert, the barometer's principal investigator and director of Purdue University's Center for Commercial Agriculture. "It's notable that producer sentiment dropped back to levels last seen in 2016 when the U.S. farm economy was in the early stages of an economic downturn. In addition to commodity prices and input costs weighing heavily on their operations, producers are also facing considerable uncertainty about what lies ahead for their farms with the possible government policy changes following the upcoming 2024 elections."

The Farm Financial Performance Index fell for the third consecutive month, dropping to 68 in September from 72 in August. Farmers' financial expectations have declined markedly compared to a year ago, as the index was at 86 in September 2023 — an 18-point difference. While the Farm Capital Investment Index increased by 4 points from August to a reading of 35, it sits just above its all-time low, indicating that many producers believe it is not an opportune time for making large investments.

The Short-Term Farmland Value Expectations Index dropped by 10 points to 95. This is the first time since 2020 that the index fell below 100, indicating that more farmers are expecting a decline in farmland values over the next year than those who anticipate an increase. This month's shift from a positive to a weaker outlook is attributable to a significant decrease in the percentage of producers forecasting rising values and a rise in those who expect values to remain steady.

The September survey marks the fourth consecutive year that the barometer has included questions regarding cover crop usage among corn and soybean producers. Consistent with prior years' surveys, more than half of the respondents indicated that they currently plant cover crops on part of their farms, while an additional 1 in 5 farmers reported planting cover crops sometime in the past. Interestingly, farmers who currently use cover crops say they are devoting a larger proportion of their farm's acreage to cover crops than in the past. In 2021, 41% of cover crop users noted planting them on more than 25% of their farm's acreage. This figure rose to 50% in 2023, and in this year's survey, 68% of cover crop users indicated planting cover crops on more than one-fourth of their farms.

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 derivatives marketplace, CME Group 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.

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 is a trademark of BrokerTec Americas LLC and EBS is a trademark of EBS Group LTD. The S&P 500 Index is a product of S&P Dow Jones Indices LLC ("S&P DJI"). "S&P^®", "S&P 500®", "SPY®", "SPX®", US 500 and The 500 are trademarks of Standard & Poor's Financial Services LLC; Dow Jones®, DJIA® and Dow Jones Industrial Average are service and/or trademarks of Dow Jones Trademark Holdings LLC. These trademarks have been licensed for use by Chicago Mercantile Exchange Inc. Futures contracts based on the S&P 500 Index are not sponsored, endorsed, marketed, or promoted by S&P DJI, and S&P DJI makes no representation regarding the advisability of investing in such products. All other trademarks are the property of their respective owners.

About Purdue University

Purdue University is a public research institution demonstrating excellence at scale. Ranked among top 10 public universities and with two colleges in the top four in the United States, Purdue discovers and disseminates knowledge with a quality and at a scale second to none. More than 105,000 students study at Purdue across modalities and locations, including nearly 50,000 in person on the West Lafayette campus. Committed to affordability and accessibility, Purdue's main campus has frozen tuition 13 years in a row. See how Purdue never stops in the persistent pursuit of the next giant leap — including its first comprehensive urban campus in Indianapolis, the Mitch Daniels School of Business, Purdue Computes and the One Health initiative — at https://www.purdue.edu/president/strategic-initiatives

Writer: Morgan French, mmfrench@purdue.edu
Source: James Mintert, 765-494-7004, jmintert@purdue.edu

Image Caption: Farmer sentiment reaches lowest levels since 2016 as income expectations weaken. (Purdue/CME Group Ag Economy Barometer/James Mintert)

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SOURCE CME Group

FAQ

What caused the drop in the Purdue University/CME Group Ag Economy Barometer in September 2024?

The drop was primarily caused by declining income expectations, concerns about commodity prices, high input costs, pessimistic agricultural trade prospects, and uncertainty about potential policy changes following the 2024 elections.

How did the Farm Financial Performance Index change in September 2024 compared to the previous year?

The Farm Financial Performance Index fell to 68 in September 2024, an 18-point decrease from 86 in September 2023, indicating a significant decline in farmers' financial expectations.

What percentage of farmers are concerned about government policy changes after the 2024 elections affecting their farms?

78% of producers expressed concern that government policy changes following the fall 2024 elections could impact their farms.

How has cover crop usage changed among corn and soybean producers according to the September 2024 CME Group survey?

Cover crop usage has increased, with 68% of users now planting cover crops on more than one-fourth of their farms, up from 50% in 2023 and 41% in 2021.