Episode Transcript
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Welcome to Purdue Commercial AgCast, thePurdue University Center for Commercial
Agriculture's podcast featuring farmmanagement news and information.
I'm your host, Michael Langemeier directorof the Center for Commercial Agriculture
and Professor of Agriculture Economics.
Today I'm gonna be flying solo.
Next month Joana Colussi, whichis actually a co-author on this
month's report, will be joining me.
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I'm going to review the results fromthe January 2026 Purdue University-CME
Group Ag Economy Barometer surveyof farmers across the nation.
I think you'll find theresults very interesting.
There was a sharp drop in sentimentthis month and so we'll get into that.
Each month we survey 400 farmersacross the U.S. to learn more about
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their perspective on the ag economy.
This month's Ag Economy Barometerwas conducted from the 12th
through the 16th of January.
As a point of reference, the JanuaryWASDE report came out on January 12th.
We did not ask any questions about thatreport, but certainly the report probably
had a negative impact on sentiment.
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So let's take a look at theAg Economy Barometer Index.
Just as a reminder, late 2015 toearly 2016 are the base period,
so that period is a hundred.
Turning to the current situation, wehad a drop of 23 points from 136 to
113 in the Ag Economy Barometer Index.
And it brings this index to thelowest it's been for quite a while.
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In fact we haven't seen this lowerreading, since September 2024, which
of course was before the 2024 election.
So, this was a pretty bigshock in terms of sentiment.
Last year, the index was 28points higher, sitting at 131.
So it's a big change, from last year too.
So let's dig in a little bit,look at the two sub indices.
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Both sub indices were down sharply.
The Index of CurrentConditions was down 19 points.
That's the lowest since January'25, the reading of 109.
The Index of FutureExpectations dropped to 115.
That was a 25 point drop.
Very large drop, in theIndex of Future Expectations.
That's the lowest indexsince September 2024.
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We're gonna get into some of the reasonswhy sentiment might have declined.
There's actually, I think,several potential reasons.
One of those is, as I indicated,the news coming outta the
January WASDE was not positive,particularly not positive for corn.
They actually increased theU.S. yield by a half bushel.
And they also increased theharvested acres, increasing the
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stocks to use, up to about 13.5%.
So that might have been part of it.
There's also, morenegativity regarding exports.
Also the indices related to financialperformance were more negative this
month than they were in December.
So there's several reasonsfor the drop in the Ag Economy
Barometer and the two sub indices.
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One of the things I wanted tohighlight, we typically don't do this,
but wanted to highlight one of thequestions in particular, that makes
up the Ag Economy Barometer Index.
There's five questions going to AgEconomy Barometer, all five of those
declined, in January compared to December.
But in particular, this particularquestion here, showed a rather
substantial decline in the index.
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Looking ahead, do you think it is morelikely that U.S. agriculture during the
next five years will have widespreadgood times or widespread bad times?
The percentage that indicated goodtimes dropped sharply, from 46 to 34%.
The percentage that said bad timeswent from 24% to 46%, so a very large
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in the percentage that indicated thatthey thought agriculture was gonna
have bad times in the next five years.
This helps explain why the Index ofFuture Expectations declined so much.
It was primarily due tothis particular question.
If we look at the Farm CapitalInvestment Index, like we typically do,
there was also a drop in this index.
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Typically, when the Index of CurrentConditions drops, you also see a drop
in the Farm Capital Investment Index.
We're still in a rather tight band from 45to 60, but this certainly is lower, than
what it's been reading in the last year.
I think it's noteworthy that almost threefourths of the respondents indicated that
now is a bad time to invest in machinery.
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The percent that thought it was a goodtime actually ticked up a couple percent.
It was 20%.
But more negativity, by, a vastmajority of the respondents in terms
of making purchases of machinery andbuildings drove this index downward.
In a related question, we ask do you thinkyou're gonna increase, decrease, or remain
the same your purchases of machinery.
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Only 4% indicated that theythought they were gonna increase
purchases of machinery in 2026.
So a very low percentage.
I won't spend a lot of timeon this question because this
really hasn't changed that much.
We're still looking at lower cropprices and higher input costs
being the two biggest concerns.
And margins are very tight inthe crop sector in particular.
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And overwhelmingly, if you remember, thepeople that responded to the survey about
70% are primarily crop producers, andso, those type margins are reflected in
how they answer this particular question.
I said at the beginning that exportswere also partially to explain,
why there was a drop in sentiment.
And I think this chart doesa nice job of showing that.
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If we look at December's results, 52%thought there was gonna be increase
in exports the next five years.
And only 5% a decrease.
That's changed ratherdramatically for one month.
It dropped from 52 to 42% interms of increase exports.
It's still higher than what we weresometime in early '25 and late '24.
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That percentage, but the percentthat thought they were going to,
decrease actually increased to 16%.
That's a rather sharpincrease for one month.
And so that also helps explain why theAg Economy Barometer index declined.
Digging into this a little bit more,we asked questions to corn and soybean
producers exclusively, over 80% ofthe respondents indicated that they
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grew corn and soybeans in 2025.
So that's what this question went to.
And so of these people, 21%thought we were gonna have a
decrease in soybean exports.
The next question we asked in Decemberalso, how concerned are you about
the competitiveness of U.S. soybeanexports with Brazil's exports?
80% said they wereconcerned, or very concerned.
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With very concerned being 44%.
Obviously the soybean exports hasbeen a bit of a roller coaster in
'25 and the start of '26, and sothat's why we asked that question.
There's not a lot to really talk aboutin terms of farmland values other
than, the Short -Term Farmland ValueExpectations Index remain the same.
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This is really curious because typicallywhen you see a drop in the Index or
Current Conditions, you see at least somesoftening, in the Short -Term Farmland
Value Expectations Index, but we didn't.
This tells me that farmland valuesare holding steady, or stable.
And indicating that the indexhasn't changed all that much
in the last three months.
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Taking a little deeper dive here,we look at percentage that thought
farmland value is gonna increase in thenext 12 months compared to decrease.
There was a slight uptick in those thatthought they were gonna decrease, but it's
still relatively small, compared to thepercentage we've seen, in previous months.
30% thought that farmlandvalues were going to increase.
Some questions that we ask everyJanuary, and I'm showing you results
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here from January 2020 all the waythrough January '26, is a couple
questions related to operating loans.
The first questions asked, ifrespondents expect the size of
their operating loan to be larger,smaller, or about the same this year.
If you look at this compared toJanuary '25, it was somewhat similar.
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We did see a slight uptick inthe percentage that thought their
operating loan was gonna be larger.
21% in January '26 and 18% in January '25.
This is the first questionof a two question series.
The second question is usuallymore interesting and what we do
there is we take a deep dive andwe look at the reasons why people
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expect a larger operating loan.
It's one thing to expect a largeroperating loan due to higher input
costs, than unpaid operating debt.
There's a lot of differencebetween those two.
And so let me explain that a little bit.
First of all, if we look at thisover time, in January '21, '22,
'23, and '24 , over 60% said theywere gonna increase their operating
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size because of higher input costs.
Since January '25, that's beenaround 50 to 55%, say they're
increasing the size of their loanbecause of an increase in input cost.
Of course, break even prices remainrelatively high, particularly
for crops right now, but also forquite a few livestock species.
That's not real surprising, thatwould be the main reason why you
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expect a higher operating loan.
What I want you to focus now on,though, is that last one, that
third one, unpaid operating debt.
This can be a signal that perhaps they'rehaving some difficulty because of tight
cash flow or low cash flow in repayingoperating debt in a timely fashion.
You can see that this has been abit of a roller coaster over time.
It was 35% in '20 it dropped allthe way to 5% in January '23.
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Not very much financial stressin that '22, '23 period.
Those were good profit margin years.
It increased to 17%and 23% in '24 and '25.
And then in January of '26, that increasedto 31%, which is slightly lower than the
2020 number, but pretty high comparedto what it was even last year, and
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particularly high with what it was in '23.
And so to me, that signalsalong with a higher percent,
expect larger operating loans.
If you combine that with this particularquestion, if you're increasing the
size of your operating loan primarilydue to unpaid debt, that's probably
a signal that we're seeing morefinancial stress here in early '26 then
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certainly what we saw in '23 and '24.
And so financial stressappears to be increasing.
We also asked this month, this isa question we've asked periodically
through time, and so we don't alwaysask this question every January,
but we're gonna start includingit in the January questions along
with the operating loan questions.
'Cause I think it goesright along with that.
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'Cause you think about financialstress, you've really got two things
that are critical to financial stress.
One of those is low cash flow.
I usually say negative profit margin.
That's a signal thatthere's financial stress.
The other signal, and these have tobe, these are usually tied together.
The other signal is a weak balance sheet.
And so that's why we asked aquestion related to balance sheet.
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And this is self-identified strength.
I mean, obviously we're not lookingat their individual balance sheets.
But if you look at this, about 75%indicated that either they agreed
that they had a strong balancesheet, or strongly agreed that
they had a strong balance sheet.
And so even though the cash flow is reallytight, for a lot of the respondents,
their balance sheet is relatively strong.
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I wanna tie this back tothe farmland question.
You know, farmlands are holding steady.
That's helping create a situationwhere the balance sheet is
remaining relatively strong.
Now one of the things you have to keep inmind when you're thinking about financial
stress, you're thinking about low cashflow, you're thinking about balance sheet,
is strong land values are great from astrength of the balance sheet standpoint.
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But I've been told by many people,you can't spend land appreciation,
unless you borrow against that land.
It's not a cash flow.
And so that doesn't help your cash flowsituation, but it certainly prevents
there from being a lot more financialstress, than there would be otherwise.
There would be a lot more financialstress if land values started to weaken.
Another question that we asked, we askedthis prior to the announcement in December
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of the details related to the FarmerBridge Assistance Program, and the results
are very similar to what we asked before.
In anticipation of these payments,majority of the respondents indicate
that they're gonna pay down debt.
There's some unpaid operator debtor some other debt that they'd
like to reduce a little bit,this is an opportunity to do so.
25% said they were gonnaimprove working capital.
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Certainly when you have low cash flowlike we've had in '24, '25 and '26, again,
I'm talking primarily crop producers.
That's gonna draw down your workingcapital or reduce your liquidity,
specifically reduce your current ratio.
And so one of the ways to strengthenthat current ratio in anticipation
of possibly low net returns in '26again is to increase working capital.
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So that was 25% and then about 10%said they were gonna cover family
living expenses or invest in machinery.
I want to talk about one ofthe questions that we've been
highlighting for several months now.
And the reason we highlight thisquestion is, this question is related
to the Index of Future Expectations.
If you think the policy environment inU.S. agriculture is relatively good,
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that's going to improve your sentimentwith regard to the next five years.
Once, your sentiment in the next fiveyears, gets reduced a little bit,
like it was this month, that probablymeans you have different thoughts
about the long run policy environment.
This question certainly talks aboutthe long run policy environment.
And you can see here in this chartthat was a rather large reduction
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in the percentage of respondsthat said that the U.S. today is
headed in the right direction.
And again, I tie this directly to thedrop in the Index of Future Expectations.
This certainly contributed to that dropin the Index of Future Expectations.
And so these are the highlights from theAg Economy Barometer for January 2026.
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I encourage you to check out the reporton the Ag Economy Barometer website.
I hope to see you again next month.