Farmers feel less optimistic about the future of the agricultural economy and farm operations, according to a new survey from Purdue University’s Center for Commercial Agriculture.
“The impact of rising interest rates on farm operations has been a major concern for producers in recent months,” said Dr. James Mintert, director of Purdue University’s Center for Commercial Agriculture.. “Interest rate risks, high breakeven levels and concerns that crop and livestock prices may fall are combining to suppress producer sentiment and make producers cautious about making large investments.”
Farm sentiment trended downward in June, with the Purdue University/CME Group Agricultural Economic Index at 105, down three points from the previous month. The overall decline in sentiment was driven by a five-point decline in the Future Expectations index to 112, while the Current Conditions index was at 90 in June, up one point from May’s index. Higher input costs, the risk of lower agricultural prices and rising interest rates continue to weigh on farm sentiment. This month’s Agricultural Economic Index survey was conducted June 17-21.
The Agricultural Capital Investment Index fell 3 points this month to 32, just 1 point above its all-time low. More producers said it was not a good time to make large investments this month compared to May, but the proportion of producers saying it was an opportunity remained the same.
The Short-Term Farmland Value Expectations Index remained steady at 115 in June. However, there was a notable change in producers’ long-term outlook for farmland values, with the Long-Term Farmland Value Index falling 7 points from May to 152. Fewer producers expect farmland values to increase over the next five years, while more expect values to remain stable. Of those who expect long-term increases in farmland values, 57% are confident in demand from nonfarm investors, and 16% cited inflation as the driving force. June marked the third consecutive month that “energy production” was cited as a potential driver of farmland values, with 10% of optimistic respondents indicating that energy production is the primary driver of farmland values.
This month’s survey also explored respondents’ interest in carbon capture and storage projects implemented by ethanol plants. Eight percent of respondents reported being approached about such projects, with the majority (93%) saying they received offers to pay less than $25 per acre, and only 8% receiving offers of more than $50 per acre. Additionally, 16% of respondents reported discussing leasing farmland for solar power generation within the past six months, a slight decrease from survey responses in April and May. However, lease rates continue to trend upward, with 69% of respondents being offered long-term rates of more than $1,000 per acre, an increase compared to 27% in June 2021. Notably, 27% of respondents received offers of more than $1,500 per acre, and 58% of leases included escalator clauses of 2% to 3% per year.
Click below to listen to Dr. Jim Mintert and Dr. Michael Langemeyer from Purdue University’s Center for Commercial Agriculture analyze the results of the latest monthly survey of U.S. farmers.
Source: Purdue University Center for Commercial Agriculture.