Weakening farm income prospects weigh on farmer sentiment

Rhea-AI Summary

The August Purdue University/CME Group Ag Economy Barometer dropped 13 points to 100, reflecting weakening farm income prospects. The Index of Current Conditions fell 17 points to 83, while the Index of Future Expectations decreased by 11 points to 108. Farmers' primary concerns shifted, with 30% citing lower commodity prices as their main worry, up from 20% last year. The Farm Financial Performance Index reached its lowest level since July 2020, dropping 9 points from July and 14 points year-over-year.

The Farm Capital Investment Index fell 7 points to 31, matching its all-time low. Farmland value expectations also declined, with the Short-Term Farmland Value Expectations Index dropping 13 points to 105. Despite these concerns, 70% of U.S. crop farmers expect farmland cash rental rates for 2025 to remain stable.

Positive

• 68% of respondents expect interest rates to decrease in the coming year
• 70% of U.S. crop farmers anticipate that rental rates will stay the same for the 2025 crop year

Negative

• Ag Economy Barometer dropped 13 points to 100, lowest since 2015-2016
• Index of Current Conditions fell 17 points to 83
• Index of Future Expectations decreased by 11 points to 108
• 30% of respondents cite lower commodity prices as primary concern, up from 20% last year
• Farm Financial Performance Index dropped to lowest level since July 2020
• Farm Capital Investment Index fell 7 points to 31, matching all-time low
• Short-Term Farmland Value Expectations Index dropped 13 points to 105
• Percentage of producers expecting farmland values to decline increased from 13% to 24%

WEST LAFAYETTE, Ind., Sept. 3, 2024 /PRNewswire/ -- The August Purdue University/CME Group Ag Economy Barometer dropped 13 points from July to a reading of 100, echoing levels seen from fall 2015 to winter 2016 during the early stages of a significant downturn in the U.S. farm economy. The Index of Current Conditions also dropped 17 points to 83, while the Index of Future Expectations decreased by 11 points to 108. Weakening farm income prospects weighed on farmers' sentiment as the outlook for a bountiful fall harvest was more than offset by declining crop prices. This month's survey was conducted from Aug. 12-16, 2024.

"Weakness in the barometer and related indices provide a signal that farmers are concerned about the possibility of extended weakness in farm incomes, similar to what took place from 2015 to 2019," said James Mintert, the barometer's principal investigator and director of Purdue University's Center for Commercial Agriculture.

August's survey results indicate a shift among farmers' primary concerns, with 30% of respondents identifying lower commodity prices as their primary concern, compared to 33% who cited high input costs. Last year at this time only 20% pointed to weak commodity prices as a top concern.

However, concerns about rising interest rates have lessened, with only 17% of farmers mentioning this issue, down from 24% last year. Looking ahead, 68% of respondents expect interest rates to decrease in the coming year, while just 19% anticipate an increase.

The Farm Financial Performance Index dropped 9 points from July's survey and 14 points from a year ago, reaching its lowest level since July 2020, when there was widespread uncertainty from COVID-related lockdowns. The decline in financial performance reflects ongoing concerns about weak financial conditions. In turn, weakening financial conditions led many farmers to say that now is not a good time to invest, resulting in the Farm Capital Investment Index falling 7 points to 31, matching its all-time low.

"Farmers have also become less optimistic about farmland values this summer than in recent years," said Mintert. "The percentage of farmers who think farmland values could decline within the upcoming year has been rising, which is consistent with the weak outlook for financial conditions. The weak capital investment index reading suggests farmers are going to pull back on capital expenditures."

Respondents' outlook on farmland values faded in August, with the Short-Term Farmland Value Expectations Index dropping 13 points to 105. This marks a 21-point decline from a year ago and a 41-point drop from three years ago, when the index was at its peak. The decrease is attributable to a rise in the percentage of producers expecting farmland values to decline over the next year, increasing from 13% in July to 24% in August. The Long-Term Farmland Value Index also fell, dropping 4 points to 142.

Despite concerns about weakening farm income, a majority of respondents expect farmland cash rental rates for the 2025 crop year to remain stable. According to this month's survey, 70% of U.S. crop farmers anticipate that rental rates will stay the same, while only 16% expect a decline in lease rates.

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

CME-G

View original content:https://www.prnewswire.com/news-releases/weakening-farm-income-prospects-weigh-on-farmer-sentiment-302234403.html

SOURCE CME Group

FAQ

What was the August 2024 Purdue University/CME Group Ag Economy Barometer reading?

The August 2024 Purdue University/CME Group Ag Economy Barometer dropped 13 points from July to a reading of 100.

How did the Index of Current Conditions and Future Expectations change in August 2024?

In August 2024, the Index of Current Conditions dropped 17 points to 83, while the Index of Future Expectations decreased by 11 points to 108.

What percentage of farmers cited lower commodity prices as their primary concern in August 2024?

In August 2024, 30% of respondents identified lower commodity prices as their primary concern, up from 20% the previous year.

How did the Farm Capital Investment Index change in August 2024?

The Farm Capital Investment Index fell 7 points to 31 in August 2024, matching its all-time low.

What percentage of U.S. crop farmers expect farmland cash rental rates to remain stable for the 2025 crop year?

According to the August 2024 survey, 70% of U.S. crop farmers anticipate that farmland cash rental rates will stay the same for the 2025 crop year.