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US farmers' outlook improves in May

The Index of Future Expectations rose to 117, indicating positive future outlooks, while the Current Conditions Index improved slightly.

Mar 2024 2 100
Purdue University/CME Group Ag Economy Barometer

The Purdue University/CME Group Ag Economy Barometer index rose to 108 in May, marking a 9-point increase from April. This improvement reflects increased optimism among U.S. farmers, driven by higher crop prices and better planting progress for corn and soybeans. The Index of Future Expectations climbed 11 points to 117, while the Current Conditions Index rose 6 points.

James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture, noted that while farmers expect conditions to improve, financial challenges for 2024 remain a concern.

The Farm Financial Performance Index saw a 6-point increase to 82 in May, showing some improvement in farmers' expected financial performance compared to last year. Despite this rise, the index is still 15 points lower than at the end of 2023, indicating continued financial challenges.

Producers' outlook on capital investments improved modestly, with the Farm Capital Investment Index rising to 35, up from 31 in April. However, 77% of respondents still believe it is a bad time for large investments, citing high interest rates and elevated prices for farm machinery and new construction as the main reasons. Of those who felt it was a good time to invest, 45% pointed to high inventories at machinery dealers.

Views on farmland values remained steady, with a small 3-point increase in the Short-Term Farmland Value Expectations Index. Despite a weakened sentiment in 2024 compared to last fall, nonfarm investor demand and inflation continue to drive optimism. The survey also noted an increase in the importance of energy production from wind and solar installations, with 12% of respondents citing it as a factor for higher farmland values, up from 8% in April.

Interest in Carbon Capture and Storage (CCS) projects is rising among ethanol plants, driven by tax credits from the Inflation Reduction Act. Seven percent of farmers reported being approached about CCS projects, with payment rates per acre ranging from under $26 to over $50.

Leasing farmland for solar energy production is also gaining traction. Approximately 20% of respondents in April and May reported discussing such leases, up from 12% in March. Over half of these respondents were offered long-term lease rates of $1,000 per acre or more, with 27% receiving offers exceeding $1,250 per acre. Around 30% of those who explored leasing options have now signed solar energy leases.

The Purdue University Center for Commercial Agriculture, founded in 2011, continues to provide professional development and educational programs for farmers. The center’s faculty and staff develop research and programs addressing the needs of modern agricultural management.

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