May 6, 2025 • 21 mins
Farmer sentiment improved in April as producers expressed more optimism about current and future conditions on their farms. Purdue ag economists James Mintert and Michael Langemeier share their insight into the results of the April 2025 Ag Economy Barometer survey, conducted from April 14-21, in this episode of the Purdue Commercial AgCast. The Purdue University/CME Group Ag Economy Barometer rose 8 points to a reading of 148, up from 140 in March. Key topics include the surprising economic optimism among livestock producers, farm capital investment trends, and ongoing trade policy impacts. The conversation also covers survey respondents' expectations for farm input costs, interest rates, and the potential long-term effects of tariffs on U.S. agriculture.
The Ag Economy Barometer sentiment index is calculated each month from 400 U.S. agricultural producers’ responses to a telephone survey. Further details on the full report is available at https://purdue.edu/agbarometer. Slides and the transcript from the discussion can be found at https://purdue.ag/agcast186.
You can find the FULL video episode on our YouTube channel. Visit https://youtu.be/ZAK199Yq61c to subscribe and watch.
Podcast provided by Purdue University's Center for Commercial Agriculture. For more economic information and insights on the Ag Economy Barometer, visit us at http://purdue.edu/commercialag.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcome to Purdue Commercial AgCast, thePurdue University Center for Commercial
(00:03):
Agriculture's podcast, featuringfarm management news and information.
I'm your host, James Mintert,emeritus professor of Agricultural
Economics at Purdue University.
And joining me today is my colleague,Dr. Michael Langemeier, director of the
Center for Commercial Agriculture andprofessor of Ag Economics here at Purdue.
We're gonna review the results fromthe April 2025, Purdue University-CME
(00:24):
Group Ag Economy Barometer surveyof farmers from across the nation.
Each month we survey 400 farmersacross the U.S. to learn more about
their perspectives on the ag economy.
This month's Ag Barometersurvey was conducted from the
14th through the 21st of April.
(00:45):
Michael, the Barometer Index roseeight points to 148 and that leaves
it just four points below therecent peak of 152 back in February.
And I dunno about you, but I was alittle bit surprised at the increase,
uh, given what's taken place.
Current Condition Indexrose nine points to 141.
Again, that was a bit of a surprise.
(01:06):
That's the highest CurrentCondition Index since December of
2021 and the Future ExpectationIndex rose eight points to 152.
And we've been kind of trackingthe relationship between the
Index of Future Expectations andthe Index of Current Conditions.
Future Expectations is still higher thanthe Current Condition Index, but that gap
has really narrowed compared to last fall.
(01:28):
Last fall, future expectations were much,much higher than current conditions.
Now there are still above bynine points, but that gap is
really narrowed quite a bit.
So, let's start off withthe beginning, Michael.
Were you surprised that thebarometer went up this month?
Given the answers to someof the other questions?
I wasn't as surprised as Iwould be if we wouldn't have
(01:48):
included the trade questions.
For example, we're gonna talk aboutthis later on, uh, but one of the trade
questions essentially asked, do you thinkafter the trade war, the, the tariff, uh,
imposition of the tariffs, uh, agricultureis gonna be better off in the long run.
And over two thirds said, yes.
And so I think that helps explainwhy the Index of Future Expectations
is still relatively high.
(02:08):
I'm a little bit puzzled that the,that the Index of Current Conditions
is, is as as high as it, as it is.
I, one of the things we always have tokeep in mind here is there is a fairly
large percentage of folks here that arelivestock producers, particularly cattle
producers, and they, they are experiencingreally good economic returns right now.
(02:29):
Yeah, that's a good point.
I think every month, um, a minimumof 19% of the producers in the
survey have a beef enterprise.
The reality is we usuallyget more than that.
Um, in fact, we've been tracking inrecent months, starting sometime last
year, the exact percentage of peoplewho have a livestock enterprise and what
percentage of their gross farm incomeactually comes from the livestock side.
(02:52):
So our, our survey's probably pickingup a little stronger livestock
influence from people that have multipleenterprises than than you might expect.
And that does helpexplain it a little bit.
But you really didn'tanswer my question, Michael.
You, you kind of cheated therea little bit because the first
five questions on the surveyare what are used to compute the
Yes, I know.
the barometer.
And then the otherquestions come much later.
(03:13):
So if you just looked at thebarometer itself, were you surprised.
Yes.
I, I,
Okay, there you go.
And, and particular theIndex of Current Conditions.
I, I did not expect that to increase.
In fact, I, I expectedthat to drop a little bit.
Um, the sub index is the oneI was a little surprised at.
You know, given how they answer someof those questions, that the Index of
(03:34):
Future Expectations makes sense to me.
The one caveat to that, I guess,Michael, is I would say that, uh, cash
prices for corn and soybeans have heldup better than you might have expected
given some of the trade announcements.
That, that's definitely the case.
And, and one other thing also thatyou had to keep in mind is, is there
were some payments received becausethe continuing resolution in December.
And also I think people areexpecting some payments, uh,
(03:55):
if, if these tariffs continue.
You know, some payments for compensationregarding the current trade policy.
And so, so if you include the, thefact that livestock producers are doing
fairly well, the, the, the crop priceshave improved a little bit and the
fact that we're looking at some pretty,pretty sizable government payments
in '25, maybe it makes more sense.
Yeah, I, I think that's, I think allthose factors kind of come together and
(04:17):
kind of help explain what's going on.
The Farm Financial performance index,uh, it dropped the point, which is
trivial in terms of any significance.
So sitting at 101, um, that's still11 points higher than it was back in
October before the November election.
33 points higher than it was in September.
And if you look at it on a chart,there's kind of a sideways pattern here.
(04:37):
We've been basically above100 going back to last fall.
Um, really in that October timeframe.
So, uh, if you look at it, um,people are basically saying 2025
is gonna be about the same as 2024?
And that's very consistentwith my projections.
One of the surprises, at least tome, Michael, on this report was
(04:59):
the Farm Capital Investment Index.
It rose seven points this month.
That gives us the highest readingfor the index since May of 2021.
So the index reading was 61.
Uh, if you go back a yearago, that index was at 31.
2 years ago, 43.
3 years ago, 36.
So it's one of the highest readings we'vehad in quite some time, and that index
(05:20):
really kind of hovered in that 30 to about45 or 50 range for quite a period of time.
So to see it at 61 seems,you know, quite surprising I
think with respect to strength.
If you look underneath at thequestion that that index is based
on which is thinking about largefarm investments like buildings and
machinery, do you think now is a goodtime or a bad time to buy such items?
(05:42):
What's been driving the change hasbeen looking at it over the last
year, for example, uh, fewer peopleare reporting it's a bad time, and
more people are reporting it asa good time to make investments.
So, a year ago, only 11% ofthe survey said it was a good
time to make large investments.
This month it was 25%.
A year ago, 80% said it was a badtime to make large investments.
(06:04):
This month it was down to 64%.
So the reason I'm a little surprisedat this is you and I've been looking at
this, you know, if you look at what'staking place with respect to farm
machinery sales, they have dropped hard.
Uh, really two years in a row.
They were down somewhat last year,but clearly down hard in this first
quarter of 2025, according to theAssociation of Equipment Manufacturers.
(06:25):
And yet our index was strengthening.
So help me out here, seeif you can explain this.
This one is very difficult and Idon't have a clear answer, but,
uh, along with your, your tractorsales and your combine sales.
Another indicator here that doesnot match with what we're seeing
is the Federal Reserve Bankof, I believe it's Kansas City.
As a capital spending index.
That's really related tomachinery and equipment.
(06:46):
That thing has just been sinking.
Now, they don't have thefirst quarter data in yet.
Uh, but that thing has beenreally, has really dropped, uh,
dropped in the later part of '24.
We'll see what the, the first quarterresults look like for that index,
but it's certainly inconsistentwith what's been going on here.
Now the follow up is we do askpeople, uh, what their plans for farm
machinery purchases in the upcomingyear compared to a year ago are, and
(07:10):
that data is probably more supportiveof what's taken place out there.
So the percentage of people who saythey plan to increase their purchases
of, uh, farm machinery, uh, this yearcompared to last year has dipped.
Uh, this month it was only 6%.
If you go back a couple ofmonths ago, it was at 10%.
That percentage neverseems to get very high.
Um, so maybe we're picking up somethingthat's a little more consistent there.
(07:33):
And then the other thing that youand I have been talking about is.
The, the way the index is constructed,you can get some small changes in
that percentage of people who saythey, uh, feel like it's a good
time to make investments, and thatcan have maybe a little bit of an
outsize influence on the index itself.
Roughly two thirds of the people inthe survey this month still set it's
a bad time to make large investments.
(07:55):
And, you know, I, one, one perspectiveis to say that group is really dominating
what's taking place with respect tonew, new, uh, machinery purchases.
Yeah, I think that's a good way to put it.
When we ask people whether they buyused or used or new machinery, if
you look at the average over the lastseveral months, 70% buy used machinery.
Yeah.
It, so one of the dilemmas we havewith our index is when we ask people
(08:17):
about making investments, are theythinking about used versus new?
Yeah.
We don't, we don't distinguish.
Right.
So there's some issues there.
We're gonna do some follow up workand see if we can do a better job of
figuring out what's going on there.
And, and probably, uh, Idunno about you Michael.
I think my perspective is we need tolook harder at trying to figure out
more information about the folks who sayit's a good time to make investments.
(08:39):
Yes.
And see if we can figure out ifthey're actually doing things and what
percentage of the market they really are.
The Short-Term Farmland Value Index wasdown eight points compared to March.
But that leaves it in that range ofabout 110 to 120, suggesting, I would
characterize it as cautious optimismabout values, either increasing
modestly or, or perhaps holding steady.
(09:01):
And, and that, that's kind of importantbecause the farm balance sheet is
tied so heavily to farmland values,so that maybe correlates with some
of the optimism we've picked up.
I, I definitely think so.
Particularly in the long run.
Uh, liquidity did slip, uh, in '24compared to '23, but it's, it's
still not, uh, as low as what it was.
(09:23):
You know, like '15, '16, '17,and during that time period.
And so liquidities dropped, but it'snot at a crisis point right now.
Uh, but, but certainly, uh, certainlythe fact that that farmland values
are holding up is extremely important,uh, to the, to the non-current
portion of the balance sheet.
And, and it's keeping those,uh, leverage ratios fairly low.
So we ask people about theirbiggest concerns for their
(09:46):
farming operation the next year.
And we've done that forquite some time now.
And, and, uh, the chart that Iaccompanies this podcast just goes back
to September 'cause I thought we'd lookat, you know, what was taking place just
before the election, uh, versus now.
And not too much change across theboard, Michael, except for one thing.
And that is the availability of inputs.
(10:06):
Going back to last fall, I thinkin September, only 3% of the people
in the survey said that they wereconcerned about availability of inputs.
That's tripled morethan tripled now to 10%.
And before the podcast, you and I weretalking about this, if you go back in
the Covid timeframe, that's when peopleare most worried about availability of
(10:27):
inputs and they focused, uh, at thattime I. I think we got above 15% or so.
So we're not back to where people werein, in the Covid era with respect to
concerns about availability of inputs,but it's, it's noticeable, right?
People are starting to worry about this.
And I think it's, I think thosetwo are very closely related.
Like you said, I think those that probablyanswered availability of inputs is a,
(10:50):
is a big concern, are also probablyworried about, uh, increases in, in the
prices paid index, which we did ask.
Yeah, that good, good point.
So that prices paid index, uh,I think we told them in the
question increased by about 2%per year during the last 10 years.
And we asked them using that as aframe of reference, by how much
do you expect farm input prices tochange during the next 12 months?
(11:13):
And you know, it's, it'sreally kind of interesting.
I mean, the majority, 63% said zero to4%, which would be fairly consistent
with that 2% from the last 10 years.
But 29% said four to 8%.
And if you look at it from theregoing up, I think what 36% of the
people in the survey think farminput prices could increase by 4% or
(11:35):
more over the next, uh, 12 months.
Those are some big increases.
They definitely are some big increasesin, there hasn't been that many years.
Uh, in the last 10, maybeone, maybe one or two.
Uh, right after Covid there were,were prices increased over 5%.
Yeah.
And going back to our previous question,you know, the number one concern
and has been really for, for quitesome time has been high input cost.
(11:57):
Yeah.
38% shows that as their top concern.
So, you know, why arethey worried about that?
Well, that fact that 36% think the inputprices could increase by 4% or more in
the next 12 months kind of explains it.
And really when you look at,when you dig under the hood.
Uh, looking at the items thatare included in the prices paid,
uh, it's not consistent by anystretch of the imagination.
(12:18):
I just updated some informationlooking at year to year changes
in some of the items, uh, in theprices paid for, for farm inputs,
for, for an article I'm working on.
And there is items, uh, that,that are just almost flat.
There's almost no increase.
The big one in prices pay that increase,which we don't always think about because
we talk a lot about crop producers in thissurvey is the price of purchase livestock.
(12:41):
Yeah.
So that's driving up the pricespaid index because it's, it's, it's
such a important component of that.
Uh, and, and, and the actual prices paidindex includes all the, all the items,
uh, used in production agricultureactually increased 6% year to year.
So Michael, when you look at it,uh, for example, the crop budgets,
(13:01):
Yeah.
What kind of crop budgetincrease are you showing?
They're, they're very flat.
With 2024.
With with '24 because a lot of theinputs that are crop related are, are
either up slightly or down slightly.
The exception there isdiesel is down substantially.
And, and some of the fertilizers,potash in particular is, is down
from what it was a year ago.
And so, uh, when you put all that piecestogether, uh, it, it, they're pretty flat.
(13:25):
Okay.
We asked people about their expectationsfor interest rates, and we gave
them a little bit of background.
The U.S. prime interest rate iscurrently seven point half percent.
What do you expect prime interestrate to be one year from now?
70% of producers said that theylook for interest rates to remain
either unchanged or head lower.
Uh, roughly one out of five, 19%of them said they think rates
(13:45):
will be higher a year from now.
So, um, that's, that's probablyconsistent with what the Fed has been
saying, although we've gotten moreuncertainty with tariffs and certainly
the, the tariff battle between thepresident and, and Jerome Powell, the
Fed, has been kind of interesting but
Yeah, I was thinking about howI, I would answer this question.
I probably would go with no change.
Because you have some, you have somefactors that would, would, would think
(14:08):
that maybe interest rates are gonnalower, but on the other hand, you have
some, you have some factors that might,uh, you might see higher interest rates.
And so yeah, like you said, there'sjust a lot of uncertainty with regard
to where mo monetary policy is going.
Yeah.
The dilemma for the Fed is gonnabe, you know, what is the impact
of tariffs gonna be on cost andwhat does that do to inflation?
And in turn, what does thatmean for monetary policy?
(14:29):
Um, so we ask people what impactdo you expect the U.S. government's
imposition of tariffs on imports willhave on your farm's income in 2025?
And you know, we asked this I thinka month ago, and so we repeated it.
This month 56% think tarriffs willeither reduce their farm's income in '25,
(14:49):
well reduce their farm's income in '25.
If you say no impact and addthat, then you're up to 78%.
21% say they think it'll actuallybe positive and and we're a
little puzzled by that, right?
Yeah.
I'm very puzzled with with,with that, uh, statement.
You're not gonna go beyond that.
No, I'm not gonna go beyond that.
I just, I, I just don't see that, but.
Uh, you know, I was thinking about itand we don't attempt to survey specialty
(15:14):
crop producers, but we do pick up somepeople that produce specialty crops.
And that's probably one of the fewareas where I could potentially
see some positive impact forcoming about from tariffs with
respect to restricting imports andmaybe having a positive impact.
Yeah, I think you're right.
When I, when I think abouttariffs, I, I'm usually thinking
corn, soybeans, and wheat.
So, and it's hard to paint a picturewhere that's gonna be positive
(15:36):
for corn, soybeans, and wheat.
And, and, you know, our, our surveytargets the major commodities.
It doesn't try to target people,or especially crop producers.
We do pick up some of those folks becausethey also produce the major commodities.
So.
But that's not large enoughto account for the 21%.
So that's an interesting response.
Um, if next question was, if atrade war leads to lower prices
(15:57):
for U.S. ag products, how likely doyou think it is that farmers will
receive compensation similar to2019's Market Facilitation Program?
And again, we asked this, uh, previously.
This month, 80% of the producers thinkof programs similar to the 2019 MFP will
help compensate their losses that mightrecur as a, as a result of the trade war.
(16:19):
That's up, I believe the last time weasked that last month was closer to 70%.
So more people are more confidentthat they're gonna get compensated.
I think that's probably feeding rightback into that current condition index.
Definitely, it's definitely increasingthe Index of Current Conditions.
Uh, we ask people how important is itthat a new farm bill be passed in 2025?
(16:43):
Um, 72% said it was eitherimportant or very important.
Again, that's up from previous times.
We've, we've been askingthis question off and on.
Uh, that's I think, the highestpercentage we've ever gotten to
say important or very important.
Which is not surprising to me becausethe way, the way I, I talk about this
issue when, when I'm asked by, byreporters is just think of it this way.
(17:04):
You've got uncertaintyrelated to trade policy.
You've got uncertaintyrelated to monetary policy.
And you add to that, that wedon't have a farm bill passed.
Of course people wantthe farm bill passed.
So we have a little bit of, of, little bitof knowledge or, or, or, or information
about where that safety net's gonna be.
Yeah, I think that's exactlywhat's going on and, and people are
really starting to focus on that.
Um.
So one of the questions we asked was,do you expect to have some difficulty in
(17:28):
obtaining inputs for your farm operationin 2025 as a result of, of tariffs?
And just over half, I think 53% ofthe people in the survey, so kind
of a coin toss almost said that theythought they would have some difficulty.
And if you said, uh, that you wereexpected to have some difficulty
obtaining, uh, inputs this year?
(17:49):
The follow up question went to thatgroup, so it went to just over half the
people in the survey, and we said, whatdo you expect to have trouble with?
Number one was fertilizer at 37%.
Uh, number two, and really a kindof a, a tie really, uh, was parts
for farm machinery and electronicsand crop chemicals chosen I think
in the case of parts for farmmachinery and electronics was 27%.
(18:12):
Crop chemicals was 26%.
So no real difference there.
People weren't worriedabout new farm machinery.
We only 3% chose that.
And then there was the other category, 7%.
So fertilizer is, is concern.
That's largely, I think,related to Canada.
Yeah.
And you mentioned potash.
Yeah.
So far hasn't had apositive impact on prices,
but it could,
but it could, people are worried about it.
(18:33):
Um, and then the parts issue is, isclearly out there and, and chemicals,
because we do import a fair number of, of
yes
crop chemicals as well.
So there is some concern out thereand I think that reflected also in
the previous question where we askedhim about, uh, top concerns in 10%
said they were worried about inputs.
Um, so finally, I think our last questionkind of to wrap up the survey was, do
(18:56):
you expect the increased use of tariffsby the U.S. to strengthen or weaken
the U.S. ag economy in the long run?
I think this is the first time weasked this particular question.
70% said they think in the long run itwill strengthen the U.S. ag economy.
I'm gonna let you comment on that.
I was very surprised that it was 70%.
I would've thought that it,it might be 50%, but, but 70%
(19:20):
was very surprising to me.
And, and I think if you, if you asked ageconomist this same question, I think it
would be flipped that, uh, 70% or or largepercentage would say it's going to weaken.
And, and, and one of the reasons,one of the reasons that, that, that
economists would say that is, is whenyou have trade disputes, like we're
(19:41):
currently, uh, currently having, youworry about your long run market share it.
It's not only do we drop this marketshare temporarily, how do you get it back?
It's not, once you've lost market share,it's not that easy to get it back.
And that's the big concern I have.
Uh, is, is that we're gonnapermanently lose some market
share, particularly to China.
(20:04):
Yeah.
In terms of our share,
yeah.
Yeah.
In China's imports.
Yeah.
And losing market shareprobably to Brazil, right?
Yes.
Uh, so, uh, yeah, you saidflipped for ag economist.
I, based on the economists thatI've had chance to visit with,
I don't know anyone who actually
It might be
a hundred percent.
would choose strengthen.
Uh, so it's, this isa very curious result.
(20:25):
I. I would, I like you, I was surprisedat the actual percentage of 70%.
I was not surprised.
It was a significant positive,uh, 'cause you could pick that up
from comments people were makingat, at various, uh, press outlets
and various meetings and so forth.
So, um, I. But yeah, it's, it, it again,I think it also explains why the Future
(20:47):
Expectation Index is as strong as it is.
Definitely.
I think it's extremelyimportant in explaining that
Index of Future Expectation.
Yeah.
Because if you didn't think this, thatindex of that, that the future would
not look near as rosie, obviously.
Yeah.
So that wraps up the highlightsof this month's survey.
You can get the full report on thePurdue-CME Group Ag Economy Barometer
website, which is purdue.edu/agbarometer.
(21:10):
Of course you can listen to thispodcast not only for the Ag Barometer
updates periodically, but also awide variety of topics, which you can
subscribe to on all the major co podcastproviders as well as on the website.
So on behalf of my colleague, Dr.Michael Langemeier and the Center for
Commercial Agriculture, I'm James Mintert.
Thanks for joining us.
Welcome to Purdue Commercial AgCast, thePurdue University Center for Commercial
(00:03):
Agriculture's podcast, featuringfarm management news and information.
I'm your host, James Mintert,emeritus professor of Agricultural
Economics at Purdue University.
And joining me today is my colleague,Dr. Michael Langemeier, director of the
Center for Commercial Agriculture andprofessor of Ag Economics here at Purdue.
We're gonna review the results fromthe April 2025, Purdue University-CME
(00:24):
Group Ag Economy Barometer surveyof farmers from across the nation.
Each month we survey 400 farmersacross the U.S. to learn more about
their perspectives on the ag economy.
This month's Ag Barometersurvey was conducted from the
14th through the 21st of April.
(00:45):
Michael, the Barometer Index roseeight points to 148 and that leaves
it just four points below therecent peak of 152 back in February.
And I dunno about you, but I was alittle bit surprised at the increase,
uh, given what's taken place.
Current Condition Indexrose nine points to 141.
Again, that was a bit of a surprise.
(01:06):
That's the highest CurrentCondition Index since December of
2021 and the Future ExpectationIndex rose eight points to 152.
And we've been kind of trackingthe relationship between the
Index of Future Expectations andthe Index of Current Conditions.
Future Expectations is still higher thanthe Current Condition Index, but that gap
has really narrowed compared to last fall.
(01:28):
Last fall, future expectations were much,much higher than current conditions.
Now there are still above bynine points, but that gap is
really narrowed quite a bit.
So, let's start off withthe beginning, Michael.
Were you surprised that thebarometer went up this month?
Given the answers to someof the other questions?
I wasn't as surprised as Iwould be if we wouldn't have
(01:48):
included the trade questions.
For example, we're gonna talk aboutthis later on, uh, but one of the trade
questions essentially asked, do you thinkafter the trade war, the, the tariff, uh,
imposition of the tariffs, uh, agricultureis gonna be better off in the long run.
And over two thirds said, yes.
And so I think that helps explainwhy the Index of Future Expectations
is still relatively high.
(02:08):
I'm a little bit puzzled that the,that the Index of Current Conditions
is, is as as high as it, as it is.
I, one of the things we always have tokeep in mind here is there is a fairly
large percentage of folks here that arelivestock producers, particularly cattle
producers, and they, they are experiencingreally good economic returns right now.
(02:29):
Yeah, that's a good point.
I think every month, um, a minimumof 19% of the producers in the
survey have a beef enterprise.
The reality is we usuallyget more than that.
Um, in fact, we've been tracking inrecent months, starting sometime last
year, the exact percentage of peoplewho have a livestock enterprise and what
percentage of their gross farm incomeactually comes from the livestock side.
(02:52):
So our, our survey's probably pickingup a little stronger livestock
influence from people that have multipleenterprises than than you might expect.
And that does helpexplain it a little bit.
But you really didn'tanswer my question, Michael.
You, you kind of cheated therea little bit because the first
five questions on the surveyare what are used to compute the
Yes, I know.
the barometer.
And then the otherquestions come much later.
(03:13):
So if you just looked at thebarometer itself, were you surprised.
Yes.
I, I,
Okay, there you go.
And, and particular theIndex of Current Conditions.
I, I did not expect that to increase.
In fact, I, I expectedthat to drop a little bit.
Um, the sub index is the oneI was a little surprised at.
You know, given how they answer someof those questions, that the Index of
(03:34):
Future Expectations makes sense to me.
The one caveat to that, I guess,Michael, is I would say that, uh, cash
prices for corn and soybeans have heldup better than you might have expected
given some of the trade announcements.
That, that's definitely the case.
And, and one other thing also thatyou had to keep in mind is, is there
were some payments received becausethe continuing resolution in December.
And also I think people areexpecting some payments, uh,
(03:55):
if, if these tariffs continue.
You know, some payments for compensationregarding the current trade policy.
And so, so if you include the, thefact that livestock producers are doing
fairly well, the, the, the crop priceshave improved a little bit and the
fact that we're looking at some pretty,pretty sizable government payments
in '25, maybe it makes more sense.
Yeah, I, I think that's, I think allthose factors kind of come together and
(04:17):
kind of help explain what's going on.
The Farm Financial performance index,uh, it dropped the point, which is
trivial in terms of any significance.
So sitting at 101, um, that's still11 points higher than it was back in
October before the November election.
33 points higher than it was in September.
And if you look at it on a chart,there's kind of a sideways pattern here.
(04:37):
We've been basically above100 going back to last fall.
Um, really in that October timeframe.
So, uh, if you look at it, um,people are basically saying 2025
is gonna be about the same as 2024?
And that's very consistentwith my projections.
One of the surprises, at least tome, Michael, on this report was
(04:59):
the Farm Capital Investment Index.
It rose seven points this month.
That gives us the highest readingfor the index since May of 2021.
So the index reading was 61.
Uh, if you go back a yearago, that index was at 31.
2 years ago, 43.
3 years ago, 36.
So it's one of the highest readings we'vehad in quite some time, and that index
(05:20):
really kind of hovered in that 30 to about45 or 50 range for quite a period of time.
So to see it at 61 seems,you know, quite surprising I
think with respect to strength.
If you look underneath at thequestion that that index is based
on which is thinking about largefarm investments like buildings and
machinery, do you think now is a goodtime or a bad time to buy such items?
(05:42):
What's been driving the change hasbeen looking at it over the last
year, for example, uh, fewer peopleare reporting it's a bad time, and
more people are reporting it asa good time to make investments.
So, a year ago, only 11% ofthe survey said it was a good
time to make large investments.
This month it was 25%.
A year ago, 80% said it was a badtime to make large investments.
(06:04):
This month it was down to 64%.
So the reason I'm a little surprisedat this is you and I've been looking at
this, you know, if you look at what'staking place with respect to farm
machinery sales, they have dropped hard.
Uh, really two years in a row.
They were down somewhat last year,but clearly down hard in this first
quarter of 2025, according to theAssociation of Equipment Manufacturers.
(06:25):
And yet our index was strengthening.
So help me out here, seeif you can explain this.
This one is very difficult and Idon't have a clear answer, but,
uh, along with your, your tractorsales and your combine sales.
Another indicator here that doesnot match with what we're seeing
is the Federal Reserve Bankof, I believe it's Kansas City.
As a capital spending index.
That's really related tomachinery and equipment.
(06:46):
That thing has just been sinking.
Now, they don't have thefirst quarter data in yet.
Uh, but that thing has beenreally, has really dropped, uh,
dropped in the later part of '24.
We'll see what the, the first quarterresults look like for that index,
but it's certainly inconsistentwith what's been going on here.
Now the follow up is we do askpeople, uh, what their plans for farm
machinery purchases in the upcomingyear compared to a year ago are, and
(07:10):
that data is probably more supportiveof what's taken place out there.
So the percentage of people who saythey plan to increase their purchases
of, uh, farm machinery, uh, this yearcompared to last year has dipped.
Uh, this month it was only 6%.
If you go back a couple ofmonths ago, it was at 10%.
That percentage neverseems to get very high.
Um, so maybe we're picking up somethingthat's a little more consistent there.
(07:33):
And then the other thing that youand I have been talking about is.
The, the way the index is constructed,you can get some small changes in
that percentage of people who saythey, uh, feel like it's a good
time to make investments, and thatcan have maybe a little bit of an
outsize influence on the index itself.
Roughly two thirds of the people inthe survey this month still set it's
a bad time to make large investments.
(07:55):
And, you know, I, one, one perspectiveis to say that group is really dominating
what's taking place with respect tonew, new, uh, machinery purchases.
Yeah, I think that's a good way to put it.
When we ask people whether they buyused or used or new machinery, if
you look at the average over the lastseveral months, 70% buy used machinery.
Yeah.
It, so one of the dilemmas we havewith our index is when we ask people
(08:17):
about making investments, are theythinking about used versus new?
Yeah.
We don't, we don't distinguish.
Right.
So there's some issues there.
We're gonna do some follow up workand see if we can do a better job of
figuring out what's going on there.
And, and probably, uh, Idunno about you Michael.
I think my perspective is we need tolook harder at trying to figure out
more information about the folks who sayit's a good time to make investments.
(08:39):
Yes.
And see if we can figure out ifthey're actually doing things and what
percentage of the market they really are.
The Short-Term Farmland Value Index wasdown eight points compared to March.
But that leaves it in that range ofabout 110 to 120, suggesting, I would
characterize it as cautious optimismabout values, either increasing
modestly or, or perhaps holding steady.
(09:01):
And, and that, that's kind of importantbecause the farm balance sheet is
tied so heavily to farmland values,so that maybe correlates with some
of the optimism we've picked up.
I, I definitely think so.
Particularly in the long run.
Uh, liquidity did slip, uh, in '24compared to '23, but it's, it's
still not, uh, as low as what it was.
(09:23):
You know, like '15, '16, '17,and during that time period.
And so liquidities dropped, but it'snot at a crisis point right now.
Uh, but, but certainly, uh, certainlythe fact that that farmland values
are holding up is extremely important,uh, to the, to the non-current
portion of the balance sheet.
And, and it's keeping those,uh, leverage ratios fairly low.
So we ask people about theirbiggest concerns for their
(09:46):
farming operation the next year.
And we've done that forquite some time now.
And, and, uh, the chart that Iaccompanies this podcast just goes back
to September 'cause I thought we'd lookat, you know, what was taking place just
before the election, uh, versus now.
And not too much change across theboard, Michael, except for one thing.
And that is the availability of inputs.
(10:06):
Going back to last fall, I thinkin September, only 3% of the people
in the survey said that they wereconcerned about availability of inputs.
That's tripled morethan tripled now to 10%.
And before the podcast, you and I weretalking about this, if you go back in
the Covid timeframe, that's when peopleare most worried about availability of
(10:27):
inputs and they focused, uh, at thattime I. I think we got above 15% or so.
So we're not back to where people werein, in the Covid era with respect to
concerns about availability of inputs,but it's, it's noticeable, right?
People are starting to worry about this.
And I think it's, I think thosetwo are very closely related.
Like you said, I think those that probablyanswered availability of inputs is a,
(10:50):
is a big concern, are also probablyworried about, uh, increases in, in the
prices paid index, which we did ask.
Yeah, that good, good point.
So that prices paid index, uh,I think we told them in the
question increased by about 2%per year during the last 10 years.
And we asked them using that as aframe of reference, by how much
do you expect farm input prices tochange during the next 12 months?
(11:13):
And you know, it's, it'sreally kind of interesting.
I mean, the majority, 63% said zero to4%, which would be fairly consistent
with that 2% from the last 10 years.
But 29% said four to 8%.
And if you look at it from theregoing up, I think what 36% of the
people in the survey think farminput prices could increase by 4% or
(11:35):
more over the next, uh, 12 months.
Those are some big increases.
They definitely are some big increasesin, there hasn't been that many years.
Uh, in the last 10, maybeone, maybe one or two.
Uh, right after Covid there were,were prices increased over 5%.
Yeah.
And going back to our previous question,you know, the number one concern
and has been really for, for quitesome time has been high input cost.
(11:57):
Yeah.
38% shows that as their top concern.
So, you know, why arethey worried about that?
Well, that fact that 36% think the inputprices could increase by 4% or more in
the next 12 months kind of explains it.
And really when you look at,when you dig under the hood.
Uh, looking at the items thatare included in the prices paid,
uh, it's not consistent by anystretch of the imagination.
(12:18):
I just updated some informationlooking at year to year changes
in some of the items, uh, in theprices paid for, for farm inputs,
for, for an article I'm working on.
And there is items, uh, that,that are just almost flat.
There's almost no increase.
The big one in prices pay that increase,which we don't always think about because
we talk a lot about crop producers in thissurvey is the price of purchase livestock.
(12:41):
Yeah.
So that's driving up the pricespaid index because it's, it's, it's
such a important component of that.
Uh, and, and, and the actual prices paidindex includes all the, all the items,
uh, used in production agricultureactually increased 6% year to year.
So Michael, when you look at it,uh, for example, the crop budgets,
(13:01):
Yeah.
What kind of crop budgetincrease are you showing?
They're, they're very flat.
With 2024.
With with '24 because a lot of theinputs that are crop related are, are
either up slightly or down slightly.
The exception there isdiesel is down substantially.
And, and some of the fertilizers,potash in particular is, is down
from what it was a year ago.
And so, uh, when you put all that piecestogether, uh, it, it, they're pretty flat.
(13:25):
Okay.
We asked people about their expectationsfor interest rates, and we gave
them a little bit of background.
The U.S. prime interest rate iscurrently seven point half percent.
What do you expect prime interestrate to be one year from now?
70% of producers said that theylook for interest rates to remain
either unchanged or head lower.
Uh, roughly one out of five, 19%of them said they think rates
(13:45):
will be higher a year from now.
So, um, that's, that's probablyconsistent with what the Fed has been
saying, although we've gotten moreuncertainty with tariffs and certainly
the, the tariff battle between thepresident and, and Jerome Powell, the
Fed, has been kind of interesting but
Yeah, I was thinking about howI, I would answer this question.
I probably would go with no change.
Because you have some, you have somefactors that would, would, would think
(14:08):
that maybe interest rates are gonnalower, but on the other hand, you have
some, you have some factors that might,uh, you might see higher interest rates.
And so yeah, like you said, there'sjust a lot of uncertainty with regard
to where mo monetary policy is going.
Yeah.
The dilemma for the Fed is gonnabe, you know, what is the impact
of tariffs gonna be on cost andwhat does that do to inflation?
And in turn, what does thatmean for monetary policy?
(14:29):
Um, so we ask people what impactdo you expect the U.S. government's
imposition of tariffs on imports willhave on your farm's income in 2025?
And you know, we asked this I thinka month ago, and so we repeated it.
This month 56% think tarriffs willeither reduce their farm's income in '25,
(14:49):
well reduce their farm's income in '25.
If you say no impact and addthat, then you're up to 78%.
21% say they think it'll actuallybe positive and and we're a
little puzzled by that, right?
Yeah.
I'm very puzzled with with,with that, uh, statement.
You're not gonna go beyond that.
No, I'm not gonna go beyond that.
I just, I, I just don't see that, but.
Uh, you know, I was thinking about itand we don't attempt to survey specialty
(15:14):
crop producers, but we do pick up somepeople that produce specialty crops.
And that's probably one of the fewareas where I could potentially
see some positive impact forcoming about from tariffs with
respect to restricting imports andmaybe having a positive impact.
Yeah, I think you're right.
When I, when I think abouttariffs, I, I'm usually thinking
corn, soybeans, and wheat.
So, and it's hard to paint a picturewhere that's gonna be positive
(15:36):
for corn, soybeans, and wheat.
And, and, you know, our, our surveytargets the major commodities.
It doesn't try to target people,or especially crop producers.
We do pick up some of those folks becausethey also produce the major commodities.
So.
But that's not large enoughto account for the 21%.
So that's an interesting response.
Um, if next question was, if atrade war leads to lower prices
(15:57):
for U.S. ag products, how likely doyou think it is that farmers will
receive compensation similar to2019's Market Facilitation Program?
And again, we asked this, uh, previously.
This month, 80% of the producers thinkof programs similar to the 2019 MFP will
help compensate their losses that mightrecur as a, as a result of the trade war.
(16:19):
That's up, I believe the last time weasked that last month was closer to 70%.
So more people are more confidentthat they're gonna get compensated.
I think that's probably feeding rightback into that current condition index.
Definitely, it's definitely increasingthe Index of Current Conditions.
Uh, we ask people how important is itthat a new farm bill be passed in 2025?
(16:43):
Um, 72% said it was eitherimportant or very important.
Again, that's up from previous times.
We've, we've been askingthis question off and on.
Uh, that's I think, the highestpercentage we've ever gotten to
say important or very important.
Which is not surprising to me becausethe way, the way I, I talk about this
issue when, when I'm asked by, byreporters is just think of it this way.
(17:04):
You've got uncertaintyrelated to trade policy.
You've got uncertaintyrelated to monetary policy.
And you add to that, that wedon't have a farm bill passed.
Of course people wantthe farm bill passed.
So we have a little bit of, of, little bitof knowledge or, or, or, or information
about where that safety net's gonna be.
Yeah, I think that's exactlywhat's going on and, and people are
really starting to focus on that.
Um.
So one of the questions we asked was,do you expect to have some difficulty in
(17:28):
obtaining inputs for your farm operationin 2025 as a result of, of tariffs?
And just over half, I think 53% ofthe people in the survey, so kind
of a coin toss almost said that theythought they would have some difficulty.
And if you said, uh, that you wereexpected to have some difficulty
obtaining, uh, inputs this year?
(17:49):
The follow up question went to thatgroup, so it went to just over half the
people in the survey, and we said, whatdo you expect to have trouble with?
Number one was fertilizer at 37%.
Uh, number two, and really a kindof a, a tie really, uh, was parts
for farm machinery and electronicsand crop chemicals chosen I think
in the case of parts for farmmachinery and electronics was 27%.
(18:12):
Crop chemicals was 26%.
So no real difference there.
People weren't worriedabout new farm machinery.
We only 3% chose that.
And then there was the other category, 7%.
So fertilizer is, is concern.
That's largely, I think,related to Canada.
Yeah.
And you mentioned potash.
Yeah.
So far hasn't had apositive impact on prices,
but it could,
but it could, people are worried about it.
(18:33):
Um, and then the parts issue is, isclearly out there and, and chemicals,
because we do import a fair number of, of
yes
crop chemicals as well.
So there is some concern out thereand I think that reflected also in
the previous question where we askedhim about, uh, top concerns in 10%
said they were worried about inputs.
Um, so finally, I think our last questionkind of to wrap up the survey was, do
(18:56):
you expect the increased use of tariffsby the U.S. to strengthen or weaken
the U.S. ag economy in the long run?
I think this is the first time weasked this particular question.
70% said they think in the long run itwill strengthen the U.S. ag economy.
I'm gonna let you comment on that.
I was very surprised that it was 70%.
I would've thought that it,it might be 50%, but, but 70%
(19:20):
was very surprising to me.
And, and I think if you, if you asked ageconomist this same question, I think it
would be flipped that, uh, 70% or or largepercentage would say it's going to weaken.
And, and, and one of the reasons,one of the reasons that, that, that
economists would say that is, is whenyou have trade disputes, like we're
(19:41):
currently, uh, currently having, youworry about your long run market share it.
It's not only do we drop this marketshare temporarily, how do you get it back?
It's not, once you've lost market share,it's not that easy to get it back.
And that's the big concern I have.
Uh, is, is that we're gonnapermanently lose some market
share, particularly to China.
(20:04):
Yeah.
In terms of our share,
yeah.
Yeah.
In China's imports.
Yeah.
And losing market shareprobably to Brazil, right?
Yes.
Uh, so, uh, yeah, you saidflipped for ag economist.
I, based on the economists thatI've had chance to visit with,
I don't know anyone who actually
It might be
a hundred percent.
would choose strengthen.
Uh, so it's, this isa very curious result.
(20:25):
I. I would, I like you, I was surprisedat the actual percentage of 70%.
I was not surprised.
It was a significant positive,uh, 'cause you could pick that up
from comments people were makingat, at various, uh, press outlets
and various meetings and so forth.
So, um, I. But yeah, it's, it, it again,I think it also explains why the Future
(20:47):
Expectation Index is as strong as it is.
Definitely.
I think it's extremelyimportant in explaining that
Index of Future Expectation.
Yeah.
Because if you didn't think this, thatindex of that, that the future would
not look near as rosie, obviously.
Yeah.
So that wraps up the highlightsof this month's survey.
You can get the full report on thePurdue-CME Group Ag Economy Barometer
website, which is purdue.edu/agbarometer.
(21:10):
Of course you can listen to thispodcast not only for the Ag Barometer
updates periodically, but also awide variety of topics, which you can
subscribe to on all the major co podcastproviders as well as on the website.
So on behalf of my colleague, Dr.Michael Langemeier and the Center for
Commercial Agriculture, I'm James Mintert.
Thanks for joining us.
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