The Purdue University/CME Group Ag Economy Barometer, a key indicator of farmer sentiment, has registered a downturn at the outset of 2024. The January barometer fell to 106, marking an 8-point drop from December. This decline reflects a growing pessimism among producers regarding their farms' current conditions and future prospects. The Current Conditions Index saw a 9-point decrease, while the Future Expectations Index declined by 7 points compared to the previous month.
James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture, attributed this downturn primarily to producers' concerns over lower commodity prices and the anticipated reduction in farm income for 2024. The Farm Financial Performance Index, which fell by 12 points to a reading of 85, encapsulates these apprehensions.
A notable shift in the survey, conducted between January 15-19, is the increase in producers expecting a downturn in financial performance, from 20% in December to 31% in January. Additionally, those predicting stable income levels fell from 63% to 53%.
Mintert highlighted the emergence of lower commodity prices as a primary concern among producers, equating it in significance to the previously dominant issue of higher input costs. This emerging trend underscores the potential for a cost/price squeeze impacting farm incomes.
The Farm Capital Investment Index also experienced a decline, dropping 8 points to 35. Notably, the reluctance of producers to make large investments is increasingly attributed to high machinery and construction prices rather than rising interest rates, a reversal of the trend observed throughout much of 2023.
Regarding operating loans, more producers now expect their loan sizes to remain steady compared to last year, with fewer anticipating larger loans. Those expecting an increase are citing rising input costs (61%, down from 80% last year) and farm expansion (23%, up from 15% in 2023).
In terms of farmland values, the Short-Term Farmland Value Expectations Index decreased to 115, indicating reduced optimism. However, the long-term index remained stable at 150. The percentage of producers expecting a decline in farmland values over the next year increased to 16%, up from 10% three months ago.
The survey also revealed consistent interest in carbon capture, with 8% of respondents engaged in discussions about carbon contracts, mostly at payment rates below $10 per metric ton.
This report, a collaborative effort between Purdue University’s Center for Commercial Agriculture and CME Group, reflects the complex and evolving landscape of agricultural economics, offering vital insights for stakeholders in the farming sector and related industries.