In a dramatic shift from July’s optimism, farmer sentiment took a significant downturn in August, according to the latest Purdue University-CME Group Ag Economy Barometer. The index fell 13 points from the previous month, landing at 100, marking a return to levels last observed during the challenging economic period from fall 2015 to winter 2016.
The August report highlights a sharp decline in both the Index of Current Conditions and the Index of Futures Expectations. The Index of Current Conditions dropped 17 points to 83, while the Index of Futures Expectations fell 11 points to a reading of 108. This downturn in sentiment is largely attributed to deteriorating farm income prospects, overshadowing initial hopes for a robust fall harvest due to declining crop prices.
Farmers' concerns over commodity prices have intensified, with 30% of respondents citing them as a primary concern, almost equal to the 33% who are worried about high input costs. This marks a significant shift from last year when only 20% identified low commodity prices as a major issue. Meanwhile, the worry over rising interest rates has lessened, with only 17% of farmers now seeing it as a top concern, down from 24% a year ago.
The Farm Financial Performance Index saw a notable decline, dropping 9 points from July and 14 points from the previous year. This index is now at its lowest level since July 2020, reflecting the ongoing strain on farm finances. Correspondingly, the Farm Capital Investment Index fell 7 points to 31, matching its all-time low and signaling a bleak investment climate in agriculture.
Expectations for farmland values have also weakened. The Short-Term Farmland Value Expectations Index plummeted 13 points to 105, falling 21 points from a year ago and 41 points from three years ago. This decline is driven by a growing number of producers anticipating a decrease in farmland values over the next year, rising from 13% in July to 24% in August. The Long-Term Farmland Value Index also declined, though it remained above 100, indicating that while more respondents still expect values to rise, the optimism has diminished compared to recent years.
Despite these concerns, the majority of farmers remain steady regarding farmland cash rental rates. About 70% of U.S. crop farmers expect rental rates to remain unchanged for the 2025 crop year, with only 16% anticipating a decline.
The August survey data, collected from August 12-16, 2024, reveals a stark reversal in farmer sentiment, reflecting broader anxieties about the future of farm income and investment. The current climate of economic uncertainty and weakening financial indicators suggest that farmers are bracing for a potentially prolonged downturn, echoing past periods of economic strain.
