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Farmer sentiment declines in June amid high costs

Concerns over rising interest rates, high input costs and potential lower product prices contributed to the decline.

Widget Jun 2024 Web
Purdue University/CME Group Ag Economy Barometer

Farmer sentiment dipped in June, according to the Purdue University/CME Group Ag Economy Barometer, which recorded a reading of 105, down three points from the previous month. The decline was primarily driven by a drop in the Index of Future Expectations, which fell five points to 112, while the Current Conditions Index saw a slight increase to 90, up one point from May.

The survey, conducted from June 17-21, highlighted ongoing concerns among farmers regarding high input costs, the risk of lower product prices, and rising interest rates. "The impact of rising interest rates on their farm operations has become a bigger concern for producers in recent months," said James Mintert, principal investigator for the barometer and director of Purdue University’s Center for Commercial Agriculture. "Interest rate risk and high breakeven levels combined with concerns that crop and livestock prices could weaken are holding back producer sentiment and making producers cautious about making large investments."

Reflecting this caution, the Farm Capital Investment Index declined by three points to a reading of 32, just one point above its historical low. More producers indicated this month that it is not a favorable time for large investments compared to May, while the percentage of producers viewing it as a good time remained unchanged.

The Short-Term Farmland Value Expectations Index held steady at 115 for June. However, the Long-Term Farmland Values Index saw a notable drop to 152, down seven points from May. Fewer producers expect farmland values to increase over the next five years, with more anticipating values will hold steady. Among those expecting long-term increases, 57% attributed their confidence to nonfarm investor demand, while 16% cited inflation as a driving factor. Energy production emerged as a potential driver for the third consecutive month, with 10% of optimistic respondents pointing to it as a key factor.

The survey also explored interest in carbon capture and storage projects initiated by ethanol plants. Eight percent of respondents reported being approached about such projects, with 93% receiving payment offers of less than $25 per acre and only 8% receiving offers over $50 per acre. Additionally, 16% of respondents reported discussions about leasing farmland for solar energy production in the past six months, a slight decline from previous surveys. However, lease rates continued to rise, with 69% of respondents offered long-term rates of $1,000 per acre or more, compared to 27% in June 2021. Notably, 27% received offers of $1,500 per acre or more, with 58% of leases including an annual escalator clause of 2% to 3%

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