January 7, 2025 • 19 mins
Farmer sentiment drifted lower in December as the Purdue University/CME Group Ag Economy Barometer dropped 9 points to a reading of 136. The decline was driven by producers’ weaker perspective on current conditions in U.S. agriculture and their farms, with the Index of Current Conditions falling 13 points to 100. Although the Current Conditions Index declined this month, it remains 24 points above its low in September and 5 points higher than in October. The Index of Future Expectations also fell 8 points to 153, remaining 59 points above its September low and 29 points higher than the October reading. This month’s survey was conducted from Dec. 2-6, 2024.
The Ag Economy Barometer sentiment index is calculated each month from 400 U.S. agricultural producers’ responses to a telephone survey. The full report is available at https://purdue.edu/agbarometer.
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.
Slides and the transcript from the discussion can be found at https://purdue.ag/agcast181.
You can find the FULL video episode on our YouTube channel. Visit https://youtu.be/5L6ypx9J8J0 to subscribe and watch.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
James Mintert (00:06):
Welcome to Purdue Commercial AgCast,
the Purdue UniversityCenter for Commercial
Agriculture's podcastfeaturing farm management
news and information.
I'm your host today,James Mintert, Professor
Emeritus of AgriculturalEconomics here at Purdue.
And joining me todayis my colleague, Dr.
Michael Langemeier, who'sthe Director of the Center
for Commercial Agricultureand also a Professor of
Ag Economics at Purdue.
(00:26):
We're going to review theresults from the December
2024 Purdue University-CMEGroup Ag Economy Barometer
survey of farmers fromacross the nation.
Each month we survey 400farmers across the U.
S.
to learn more abouttheir perspectives
on the ag economy.
This month's Ag Barometersurvey was conducted
from the 2nd through the6th of December 2024.
(00:48):
And the Ag Economy BarometerIndex declined 9 points this
month to a rating of 136.
But that still left theindex 21 points higher
than it was in October.
And even more so when youcompare it back to September.
I think in September itwas down all the way to 88.
So, uh, Michael, wereyou surprised that we
(01:08):
saw a decline in thebarometer this month?
Michael Langemeier: It wasn't a big enough (01:10):
undefined
decline that it reallysurprised me all that much.
I think the key pointthat you made is still
much higher than it wasin September and October.
James Mintert (01:19):
Yeah, from my perspective,
it's probably going to bereally interesting to see
what happens in January.
Going back to 2016, we sawI think three months of
increases in late 2016, early2017 following the first
Trump election success.
And so, it begs the question,are we going to see a little
bit of a rebound in Januaryor maybe did the small
(01:41):
decline that we showed inDecember, is that going
to continue into January?
Michael Langemeier (01:44):
Yeah, my guess is be relatively flat.
That's always thesafest guess, right?
James Mintert (01:49):
The no change forecast.
Michael Langemeier (01:50):
Yeah.
James Mintert (01:50):
Okay.
When you look at the CurrentCondition Index and the
Future Expectation Index,you can kind of see the
difference in terms ofwhat was going on there.
Current Condition Index fell13 points compared to last
month to a reading of 100.
That's just 5 points higherthan it was in October.
The Future ExpectationIndex declined as well, but
only 8 points compared toNovember, and that left it 29
(02:13):
points higher than October.
So Current ConditionIndex just up 5 points
compared to October.
Future Expectation up 29points compared to October.
So clearly people are stillfeeling more optimistic
about the future.
Michael Langemeier (02:27):
And just to give some idea of how
unusual this is, there's a 53point difference between the
Index of Future Expectations,Index of Current Conditions,
that's about unheard of.
I mean, perhaps we sawthat back in late 2016,
but this is not typical.
If you do see a differencebetween those, it's usually
closer to 10 to 20 points.
James Mintert (02:47):
Yeah, so for listeners, if you have
a chance to look at thecharts that accompany this
podcast, it really standsout when you see the chart.
That difference thatMichael was just referring
to the divergencebetween the two indices.
And you're right,that's very unusual to
see that take place.
So people are reallyputting a heavy weight
on what they think couldhappen down the road.
(03:07):
The Farm Financial PerformanceIndex dropped back eight
points compared to November.
But that still left that indexabove where it was in October.
So it's at a reading of98 versus 106 last month.
But in October it was 90and going back to September,
that Farm FinancialPerformance Index was
all the way down to 68.
So again, people are stillfeeling better about things
(03:28):
than they were before theelection, certainly in early
fall, late summer timeframe.
Michael Langemeier: And, and you put that in (03:33):
undefined
perspective, the 98 is higherthan it was in early '24.
Uh, if you remember back toearly '24, we had stronger
prices, uh, particularly,particularly corn, uh,
compared to what we hadat the end of the year.
And so it's, and so it'sa little surprising.
James Mintert (03:46):
Yeah.
Yeah, that's agood comparison.
If you go back 12 months.
The index was sitting at 97,so we're one point higher than
12 months ago, and yet we knowfrom looking, for example,
the budgets that you maintainhere at Purdue, Michael, farm
incomes in 2024 are goingto be, particularly for corn
and soybean operations, goingto be significantly lower.
Michael Langemeier (04:05):
Yeah, they're going to be quite low.
James Mintert (04:07):
Farm Capital Investment Index was down 7
points compared to a monthago, but it was still 5
points higher than a year ago.
That index is nowsitting at 48.
Last month we kind of made alittle bit of a point of the
fact that the index got above50 because it's been kind of
a trading range of about 30to 50 for really the better
part of three years and we'rebelow 50 but not by much.
(04:31):
And what do you make of that?
Michael Langemeier (04:33):
I think the Index of Future
Expectations is drivingthis higher than it was
in September and October.
I mean look at the charthere, we're 15 to 20 points
higher, uh, than we werein September and October.
And so I, so I, I point backto the strength of that,
that, that five year index.
James Mintert: Yeah, good point. (04:50):
undefined
So, we ask people everymonth what their plans
are for farm machinerypurchases in the upcoming
year compared to a year ago.
And this goes toeverybody in the survey.
From September throughNovember, fewer people
were starting to tell usthat they were going to
pull back on their farmmachinery purchases.
This month that bounced backto the upside a little bit.
So 56 percent of the peoplein the survey this month said
(05:12):
they were going to have lowerfarm machinery purchases
in the upcoming year.
Uh, that's compared to 51percent last month, uh,
55 percent in October, and69 percent in September.
So, we're kind of seeing alittle bit of a shift here.
For a while there, people,fewer people were telling
us they were going to cutback on farm machinery.
(05:34):
Now we're kind ofedging back up.
Is there a little morerealism getting back in this?
Michael Langemeier (05:39):
I think so, and again, I'll point
to the drop in the Indexof Current Conditions.
There's a little bit, alittle bit of a drop there,
and that's consistentwith an increase.
An increase in thosethat think there's going
to be lower purchases.
James Mintert (05:52):
Yeah, and the shift is pretty
consistent here withrespect to where it's going.
It's basically bouncingbetween people who say
they're going to hold theirmachinery purchases about the
same on a year to year basisversus pulling back on them.
The percentage of people tellus they plan to increase their
purchases, pretty consistent.
It's always a small number.
This month it was 8%.
Uh, it's been as low as 5,that was back in September.
(06:15):
So we've basically bouncingin that 5-8 percent range
of saying I'm going toincrease my purchases.
So the change is always goingto be pretty consistently
over long periods of timebetween people saying about
the same and pulling back.
So for people who tell usit's a bad time to make
large investments, we'vefollowed up and asked
why do you feel that way?
(06:36):
And one of the things that'sstriking, Michael, is the
fact that the percentageof people who say it's
because of the uncertaintyabout farm profitability
has really shifted overthe last roughly 12 months.
You go back to thebeginning of this year, 17%.
of the people in the surveywho think it's a bad time to
make an investment said itwas because of uncertainty
about farm profitability.
(06:57):
That's virtually doubled.
It's at 35 percenthere in December.
Michael Langemeier (07:00):
This is a really curious, a
curious result because it'sa little inconsistent with
some of the other resultswe're gonna talk about.
I mean, as you said,there's a large increase
in the uncertainty aboutfarm profitability.
You could point to a lot ofuncertainty related to prices,
where prices are heading.
Um, uh, and so that's, that'scertainly possible there.
But we also asked a questionabout safety net, which we're
(07:22):
going to get to here, andthey actually think the safety
net's going to be strongerafter the '24 elections.
So, I think that's alittle bit inconsistent,
uh, with the way they'reanswering this chart.
Am I reading toomuch into that?
James Mintert (07:34):
Well yeah, I'm not sure I agree with
you on that one, Michael,because uncertainty about farm
profitability could be drivenstrictly by what's taking
place in the marketplace.
Michael Langemeier (07:43):
And so not so much downside,
but just volatility.
James Mintert (07:45):
Well, and so you might expect the weakness
in farm profitability to beoffset by government payments.
Michael Langemeier (07:51):
Yeah.
James Mintert (07:51):
Which I think is what we're picking
up on the other question.
Michael Langemeier (07:53):
Yeah, you're probably right.
That's probably whatthey're thinking.
James Mintert (07:55):
We'll talk about that in a minute
when we get to that chart.
The other thing that we'vebeen pointing to with respect
to why it's a bad time to makelarge investments has been
the impact of interest rates.
And that's reallyshifted, especially if
you go back to about May.
Back in May, 44 percent ofthe people in the survey who
said it was a bad time to makeinvestments pointed to rising
interest rates as a concern.
(08:16):
That's down all the wayto 20 percent this month.
That's the lowest percentagewe've gotten, I think,
since we started askingthat question back in '23.
Michael Langemeier (08:25):
Yeah, this is a, this is a,
this is a nice result forthose selling machinery.
Now we can just increasethe profits a little bit.
Uh, there'll be moresales of machinery, but
this is certainly a goodresult for those folks.
James Mintert (08:36):
So if you look at people who say it's a good
time to make large investmentsin their farming operation.
Um, first of all, in ouroverall survey, the percentage
of people who say it's a goodtime to make large investments
varies somewhat from month tomonth, and it's interesting to
watch that trend a little bit.
This month, just 17 percentof people in the survey
said it's a good time tomake large investments.
(08:58):
That's down from 22 percentwho felt that way in November.
That number has been as low asI think 13 percent in, in over
the course of 2024, Michael.
So we're still up comparedto the low, but certainly
down from, from what wewere back in November.
And then when you askthem, you know, why
is it a good time tomake large investments?
(09:19):
Um, the number one thingthey point to is the fact
that dealers have largeinventories, which is obvious
if whether you look at theequipment manufacturers data
or just drive around and lookat machinery lots, right?
Michael Langemeier (09:32):
Yeah.
One of the things that'sinteresting about this
question is, is how acouple of these bounce
around quite a bit.
Uh, you look atopportunities to expand farm.
I mean, that can be allthe way as low as 5%.
It was 15%, uh, in, inDecember 24, uh, invest in
new technology was only 3%.
Right.
In December, uh, that can,that was over 10 percent
during some of the months.
(09:52):
And so of these bouncearound a little bit, a
little, a little hard toexplain what's going on there.
James Mintert (09:58):
Yeah, and I think some of the bouncing,
I think for our listeners,one of the reasons it bounces
is because it's a smallnumber of people each month
who say it's a good time.
Michael Langemeier (10:06):
Yeah.
James Mintert (10:06):
We have a survey response, uh, of 400
people every month, um, inround numbers, if one out of
five are telling us it's agood time to make investments,
it's only 80 people, right?
So, Uh, that's, that's oneof the reasons it bounces.
It is interesting though.
If you look at the data thatwe collected from September
up through November, thepercentage of people who
(10:29):
were pointing to strongcash flows was rising.
And now this month thatdropped back, uh, which
I think is probably areflection of reality.
Michael Langemeier (10:37):
Yes.
Consistent with our FinancialPerformance Index drop.
James Mintert (10:40):
Uh, we ask people about
their farmland valueexpectations every month.
The 12 month index, theShort-Term Farmland Value
Expectation Index, readingwas 110 this month.
That's five pointslower than a month ago.
That's the second monthin a row it's gone down.
It's gone down by five pointsboth of the last two months,
but that still leaves itwell above where it was,
(11:01):
for example, uh, back in, Ithink, uh, what, September?
September it wasdown below 100.
So, um, a little weaker thanthe farmland expectations,
but still stronger than it wasbefore the election, right?
Michael Langemeier (11:16):
Yes.
James Mintert (11:16):
And when we ask people what their main reason
that they expect farmlandvalues to rise, among those
who said it was expected torise, um, fewer producers
are pointing to inflation.
You know, if you go back to,I think, October, uh, 21%, one
out of five people who thoughtfarmland values would go up
over the next five years, saidinflation was a big concern.
(11:37):
The last two months,that's down to 15%.
The other interesting thingon that, Michael, is we
started asking about energyproduction on farmland as
a reason why you might ormight not be optimistic
about farmland values.
And those results, going backto April, which is the first
time we asked the question, orincluded that as a response,
(11:58):
it's pretty consistent.
Ranging between four andI guess a peak of 12%, but
most of the time under 10.
In fact, in recent months,it's been between six
and eight this month.
That was 8 percent ofthe people pointing
to energy production.
I look at the resultsgoing back to April.
And it's not the numberone factor people are
pointing to, but it's alarge enough percentage
(12:19):
in a nationwide survey.
That energy productionis starting to have some
impact on farmland values.
Michael Langemeier (12:25):
Yeah, when we first asked this
question, I did not expectit to be 8 to 10 percent.
I mean, because it, youknow, you hear about this
in local situations, andobviously it's very important.
Land market is verythin in some areas.
It's having a large impact.
But this is nationwide.
And so I did not expectit to be that big.
And so it consists ofwhat you're thinking too.
(12:46):
Strong farm cash flow andlow interest rates were
indicated that those wereimportant factors, but those
are negative right now, andI think that's what we're
picking up here, with thisquestion here, what is
the main reason you expectfarmland prices to rise?
Those are fairly low bars, uh,strong, uh, strong farm cash
flows and low interest rates.
The non farm investment demandis positive and then energy.
(13:06):
And so energy is helping,uh, particularly in, in,
in some local markets.
James Mintert (13:11):
Yeah, and we're certainly seeing some
of that here in Indiana.
Michael Langemeier: Definitely. (13:12):
undefined
James Mintert (13:13):
But it, and it varies state by state in
terms of what impact you'rehaving, but it's interesting.
And, you know, if you lookat some of the research,
those, you know, there's atendency sometimes to think
that those impacts are justgoing to be very local.
But some of the researchwould suggest those
really disseminate, right?
If you want to think ofit in concentric circles,
kind of a relationship.
Michael Langemeier (13:32):
Well, think about how, how, how,
how many miles between, uh,between the different farms,
that individual farm operates.
James Mintert (13:40):
Yeah.
Michael Langemeier (13:41):
So these can be fairly big circles.
James Mintert (13:42):
Yeah.
And of course, from aninvestment standpoint, if
you're going to invest, you'respilling over and looking
for other opportunities.
So, um, a series of questionswe started asking before the
election and then continuedhere after the election,
because we'd learned from 2016and 2020, that Presidential
elections can have a bigimpact on people's outlook.
So, let's just talkabout those results
(14:04):
for a minute, Michael.
So, the first one is, doyou think environmental
regulations impactingagriculture will be
more restrictive, lessrestrictive, or about the
same five years from now?
And the results in NovemberDecember compared to
October are quite striking.
Um, this month inDecember, 61 percent of
the people in the surveysaid they look for those
(14:25):
environmental regulationsaffecting agriculture
to be less restrictiveand less restrictive.
And only 7 percentsaid more restrictive.
If you compare thatback to October, that's
basically upside down.
October was 10 percentsaid they expect to see
less restrictive, uh, um,regulatory environment.
Uh, and 41 percent saidthey expect to see a more
restrictive environment.
(14:47):
Quite striking.
Michael Langemeier (14:47):
Yes.
Elections do matter whenit comes to policy and then
we're, we're picking thatup with this question along
with the two tax questions.
James Mintert (14:55):
Yeah.
So just look atthe tax questions.
The results are very similar.
Uh, if you look at, uh,the question said, do you
think income tax rates forfarms and ranches will be
higher, lower about thesame five years from now.
In October, only 8 percentsaid they expect to see
lower income tax rates.
In both November andDecember, that was up to 36%.
(15:16):
And on the higher end, inOctober, 38 percent said
they thought they wouldsee, we would see higher
tax, income tax rates.
In both November and December,it was, I think in November
it was 9 percent said higherand 7 percent in, in December.
And then when you look atestate taxes, almost the same
thing with respect to whatwe saw for income tax rates.
Uh, only 10 percent ofthe people expect to see
(15:38):
higher, uh, estate taxrates, uh, in December.
Back in October, 40percent said they expect
to see higher tax rates.
So people ask us a lot,why did sentiment improve
following the election?
And the three things we'vebeen able to point to, and
these are not exclusive.
I, there could easily be someother things, but it's clear.
(16:00):
People expect tosee a different
regulatory environment.
They expect to see adifferent tax environment.
Um, then we'll get to thelast one and that's trade.
Uh, how likely do you think U.
S.
agriculture is at risk of atrade war that results in a
significant decrease in U.
S.
ag exports?
And the results, we, we didn'task this before the election.
We asked it inNovember and December.
(16:21):
We didn't think to askthis one in October.
Uh, but the results these lasttwo months, very consistent.
Uh, 48 percent of producersin December said they
think a trade war is eitherlikely or very likely.
That's up a little bit,up from 42 percent who
felt that way in November.
You know, Michael, as I thinkabout why is the barometer a
little bit weaker this monththan it was a month ago,
(16:44):
this might be the reason.
Michael Langemeier (16:45):
Yes, I think it could be.
James Mintert (16:48):
Just this increasing awareness of the
risk of a trade war and ithaving a negative impact on U.
S.
Ag exports.
And then, this is thequestion that you referred
to earlier, Michael, and thatis, Do you think that the
fall 2024 election outcomewill lead to a farm safety
net that is stronger than,weaker than, or about the
same as before the election?
And 55 percent saidthey expect to see a
(17:10):
stronger safety net.
Michael Langemeier (17:12):
I was a little surprised at this one.
I thought it wouldbe, I thought it would
be, uh, positive.
I mean, there would bequite a few people thinking
a stronger safety net.
But really, uh, we'reprobably likely just
going to extend the FarmBill for another year.
And, and even the, even whenyou looked at some of the
Farm Bill, uh, legislation,some of the things that were
going to be in, uh, a new FarmBill, they look very similar.
(17:32):
Uh, and, and so, uh,so this is interesting.
James Mintert (17:36):
So, you and I both do a lot of interviews
after each month's barometer.
And one of the questions thatcame up a month ago when we
were doing interviews was,uh, Do people who say they
expect to see a trade war,and last month it was 42%, uh,
thought a trade war was eitherlikely or very likely, do they
(17:58):
expect government paymentsto make up the difference?
And I kind of think thisquestion points to the
idea is that, yeah, people,a significant portion of
those folks are probablythinking a little bit
like the last time around.
If we have a tradeproblem, we'll probably
have some subsidies.
Michael Langemeier (18:14):
This is bigger than the farm bill.
James Mintert (18:16):
Yeah.
Michael Langemeier (18:16):
It's crop insurance and these,
these trade payments anda lot of other things.
James Mintert (18:22):
So that wraps up the highlights
of this month's survey.
You can get the full report onour website, which is purdue.
edu slash ag barometer.
Uh, and of course, there'salways more details
here on the podcast.
If you're listening tothis podcast, uh, perhaps
while you're traveling,uh, I'd encourage you, if
you have time, to take afew minutes and download
the slide deck that Michaeland I were discussing as we
(18:42):
recorded the podcast, andyou can take a closer look
at some of those charts.
Those are available,uh, always for the, for
the podcast at purdue.
edu slash commercialag.
And so on behalf of the Centerfor Commercial Agriculture
and my colleague MichaelEngemeyer, I'm Jim Minter.
Thanks for joining us.
Welcome to Purdue Commercial AgCast,
the Purdue UniversityCenter for Commercial
Agriculture's podcastfeaturing farm management
news and information.
I'm your host today,James Mintert, Professor
Emeritus of AgriculturalEconomics here at Purdue.
And joining me todayis my colleague, Dr.
Michael Langemeier, who'sthe Director of the Center
for Commercial Agricultureand also a Professor of
Ag Economics at Purdue.
(00:26):
We're going to review theresults from the December
2024 Purdue University-CMEGroup Ag Economy Barometer
survey of farmers fromacross the nation.
Each month we survey 400farmers across the U.
S.
to learn more abouttheir perspectives
on the ag economy.
This month's Ag Barometersurvey was conducted
from the 2nd through the6th of December 2024.
(00:48):
And the Ag Economy BarometerIndex declined 9 points this
month to a rating of 136.
But that still left theindex 21 points higher
than it was in October.
And even more so when youcompare it back to September.
I think in September itwas down all the way to 88.
So, uh, Michael, wereyou surprised that we
(01:08):
saw a decline in thebarometer this month?
Michael Langemeier: It wasn't a big enough (01:10):
undefined
decline that it reallysurprised me all that much.
I think the key pointthat you made is still
much higher than it wasin September and October.
James Mintert (01:19):
Yeah, from my perspective,
it's probably going to bereally interesting to see
what happens in January.
Going back to 2016, we sawI think three months of
increases in late 2016, early2017 following the first
Trump election success.
And so, it begs the question,are we going to see a little
bit of a rebound in Januaryor maybe did the small
(01:41):
decline that we showed inDecember, is that going
to continue into January?
Michael Langemeier (01:44):
Yeah, my guess is be relatively flat.
That's always thesafest guess, right?
James Mintert (01:49):
The no change forecast.
Michael Langemeier (01:50):
Yeah.
James Mintert (01:50):
Okay.
When you look at the CurrentCondition Index and the
Future Expectation Index,you can kind of see the
difference in terms ofwhat was going on there.
Current Condition Index fell13 points compared to last
month to a reading of 100.
That's just 5 points higherthan it was in October.
The Future ExpectationIndex declined as well, but
only 8 points compared toNovember, and that left it 29
(02:13):
points higher than October.
So Current ConditionIndex just up 5 points
compared to October.
Future Expectation up 29points compared to October.
So clearly people are stillfeeling more optimistic
about the future.
Michael Langemeier (02:27):
And just to give some idea of how
unusual this is, there's a 53point difference between the
Index of Future Expectations,Index of Current Conditions,
that's about unheard of.
I mean, perhaps we sawthat back in late 2016,
but this is not typical.
If you do see a differencebetween those, it's usually
closer to 10 to 20 points.
James Mintert (02:47):
Yeah, so for listeners, if you have
a chance to look at thecharts that accompany this
podcast, it really standsout when you see the chart.
That difference thatMichael was just referring
to the divergencebetween the two indices.
And you're right,that's very unusual to
see that take place.
So people are reallyputting a heavy weight
on what they think couldhappen down the road.
(03:07):
The Farm Financial PerformanceIndex dropped back eight
points compared to November.
But that still left that indexabove where it was in October.
So it's at a reading of98 versus 106 last month.
But in October it was 90and going back to September,
that Farm FinancialPerformance Index was
all the way down to 68.
So again, people are stillfeeling better about things
(03:28):
than they were before theelection, certainly in early
fall, late summer timeframe.
Michael Langemeier: And, and you put that in (03:33):
undefined
perspective, the 98 is higherthan it was in early '24.
Uh, if you remember back toearly '24, we had stronger
prices, uh, particularly,particularly corn, uh,
compared to what we hadat the end of the year.
And so it's, and so it'sa little surprising.
James Mintert (03:46):
Yeah.
Yeah, that's agood comparison.
If you go back 12 months.
The index was sitting at 97,so we're one point higher than
12 months ago, and yet we knowfrom looking, for example,
the budgets that you maintainhere at Purdue, Michael, farm
incomes in 2024 are goingto be, particularly for corn
and soybean operations, goingto be significantly lower.
Michael Langemeier (04:05):
Yeah, they're going to be quite low.
James Mintert (04:07):
Farm Capital Investment Index was down 7
points compared to a monthago, but it was still 5
points higher than a year ago.
That index is nowsitting at 48.
Last month we kind of made alittle bit of a point of the
fact that the index got above50 because it's been kind of
a trading range of about 30to 50 for really the better
part of three years and we'rebelow 50 but not by much.
(04:31):
And what do you make of that?
Michael Langemeier (04:33):
I think the Index of Future
Expectations is drivingthis higher than it was
in September and October.
I mean look at the charthere, we're 15 to 20 points
higher, uh, than we werein September and October.
And so I, so I, I point backto the strength of that,
that, that five year index.
James Mintert: Yeah, good point. (04:50):
undefined
So, we ask people everymonth what their plans
are for farm machinerypurchases in the upcoming
year compared to a year ago.
And this goes toeverybody in the survey.
From September throughNovember, fewer people
were starting to tell usthat they were going to
pull back on their farmmachinery purchases.
This month that bounced backto the upside a little bit.
So 56 percent of the peoplein the survey this month said
(05:12):
they were going to have lowerfarm machinery purchases
in the upcoming year.
Uh, that's compared to 51percent last month, uh,
55 percent in October, and69 percent in September.
So, we're kind of seeing alittle bit of a shift here.
For a while there, people,fewer people were telling
us they were going to cutback on farm machinery.
(05:34):
Now we're kind ofedging back up.
Is there a little morerealism getting back in this?
Michael Langemeier (05:39):
I think so, and again, I'll point
to the drop in the Indexof Current Conditions.
There's a little bit, alittle bit of a drop there,
and that's consistentwith an increase.
An increase in thosethat think there's going
to be lower purchases.
James Mintert (05:52):
Yeah, and the shift is pretty
consistent here withrespect to where it's going.
It's basically bouncingbetween people who say
they're going to hold theirmachinery purchases about the
same on a year to year basisversus pulling back on them.
The percentage of people tellus they plan to increase their
purchases, pretty consistent.
It's always a small number.
This month it was 8%.
Uh, it's been as low as 5,that was back in September.
(06:15):
So we've basically bouncingin that 5-8 percent range
of saying I'm going toincrease my purchases.
So the change is always goingto be pretty consistently
over long periods of timebetween people saying about
the same and pulling back.
So for people who tell usit's a bad time to make
large investments, we'vefollowed up and asked
why do you feel that way?
(06:36):
And one of the things that'sstriking, Michael, is the
fact that the percentageof people who say it's
because of the uncertaintyabout farm profitability
has really shifted overthe last roughly 12 months.
You go back to thebeginning of this year, 17%.
of the people in the surveywho think it's a bad time to
make an investment said itwas because of uncertainty
about farm profitability.
(06:57):
That's virtually doubled.
It's at 35 percenthere in December.
Michael Langemeier (07:00):
This is a really curious, a
curious result because it'sa little inconsistent with
some of the other resultswe're gonna talk about.
I mean, as you said,there's a large increase
in the uncertainty aboutfarm profitability.
You could point to a lot ofuncertainty related to prices,
where prices are heading.
Um, uh, and so that's, that'scertainly possible there.
But we also asked a questionabout safety net, which we're
(07:22):
going to get to here, andthey actually think the safety
net's going to be strongerafter the '24 elections.
So, I think that's alittle bit inconsistent,
uh, with the way they'reanswering this chart.
Am I reading toomuch into that?
James Mintert (07:34):
Well yeah, I'm not sure I agree with
you on that one, Michael,because uncertainty about farm
profitability could be drivenstrictly by what's taking
place in the marketplace.
Michael Langemeier (07:43):
And so not so much downside,
but just volatility.
James Mintert (07:45):
Well, and so you might expect the weakness
in farm profitability to beoffset by government payments.
Michael Langemeier (07:51):
Yeah.
James Mintert (07:51):
Which I think is what we're picking
up on the other question.
Michael Langemeier (07:53):
Yeah, you're probably right.
That's probably whatthey're thinking.
James Mintert (07:55):
We'll talk about that in a minute
when we get to that chart.
The other thing that we'vebeen pointing to with respect
to why it's a bad time to makelarge investments has been
the impact of interest rates.
And that's reallyshifted, especially if
you go back to about May.
Back in May, 44 percent ofthe people in the survey who
said it was a bad time to makeinvestments pointed to rising
interest rates as a concern.
(08:16):
That's down all the wayto 20 percent this month.
That's the lowest percentagewe've gotten, I think,
since we started askingthat question back in '23.
Michael Langemeier (08:25):
Yeah, this is a, this is a,
this is a nice result forthose selling machinery.
Now we can just increasethe profits a little bit.
Uh, there'll be moresales of machinery, but
this is certainly a goodresult for those folks.
James Mintert (08:36):
So if you look at people who say it's a good
time to make large investmentsin their farming operation.
Um, first of all, in ouroverall survey, the percentage
of people who say it's a goodtime to make large investments
varies somewhat from month tomonth, and it's interesting to
watch that trend a little bit.
This month, just 17 percentof people in the survey
said it's a good time tomake large investments.
(08:58):
That's down from 22 percentwho felt that way in November.
That number has been as low asI think 13 percent in, in over
the course of 2024, Michael.
So we're still up comparedto the low, but certainly
down from, from what wewere back in November.
And then when you askthem, you know, why
is it a good time tomake large investments?
(09:19):
Um, the number one thingthey point to is the fact
that dealers have largeinventories, which is obvious
if whether you look at theequipment manufacturers data
or just drive around and lookat machinery lots, right?
Michael Langemeier (09:32):
Yeah.
One of the things that'sinteresting about this
question is, is how acouple of these bounce
around quite a bit.
Uh, you look atopportunities to expand farm.
I mean, that can be allthe way as low as 5%.
It was 15%, uh, in, inDecember 24, uh, invest in
new technology was only 3%.
Right.
In December, uh, that can,that was over 10 percent
during some of the months.
(09:52):
And so of these bouncearound a little bit, a
little, a little hard toexplain what's going on there.
James Mintert (09:58):
Yeah, and I think some of the bouncing,
I think for our listeners,one of the reasons it bounces
is because it's a smallnumber of people each month
who say it's a good time.
Michael Langemeier (10:06):
Yeah.
James Mintert (10:06):
We have a survey response, uh, of 400
people every month, um, inround numbers, if one out of
five are telling us it's agood time to make investments,
it's only 80 people, right?
So, Uh, that's, that's oneof the reasons it bounces.
It is interesting though.
If you look at the data thatwe collected from September
up through November, thepercentage of people who
(10:29):
were pointing to strongcash flows was rising.
And now this month thatdropped back, uh, which
I think is probably areflection of reality.
Michael Langemeier (10:37):
Yes.
Consistent with our FinancialPerformance Index drop.
James Mintert (10:40):
Uh, we ask people about
their farmland valueexpectations every month.
The 12 month index, theShort-Term Farmland Value
Expectation Index, readingwas 110 this month.
That's five pointslower than a month ago.
That's the second monthin a row it's gone down.
It's gone down by five pointsboth of the last two months,
but that still leaves itwell above where it was,
(11:01):
for example, uh, back in, Ithink, uh, what, September?
September it wasdown below 100.
So, um, a little weaker thanthe farmland expectations,
but still stronger than it wasbefore the election, right?
Michael Langemeier (11:16):
Yes.
James Mintert (11:16):
And when we ask people what their main reason
that they expect farmlandvalues to rise, among those
who said it was expected torise, um, fewer producers
are pointing to inflation.
You know, if you go back to,I think, October, uh, 21%, one
out of five people who thoughtfarmland values would go up
over the next five years, saidinflation was a big concern.
(11:37):
The last two months,that's down to 15%.
The other interesting thingon that, Michael, is we
started asking about energyproduction on farmland as
a reason why you might ormight not be optimistic
about farmland values.
And those results, going backto April, which is the first
time we asked the question, orincluded that as a response,
(11:58):
it's pretty consistent.
Ranging between four andI guess a peak of 12%, but
most of the time under 10.
In fact, in recent months,it's been between six
and eight this month.
That was 8 percent ofthe people pointing
to energy production.
I look at the resultsgoing back to April.
And it's not the numberone factor people are
pointing to, but it's alarge enough percentage
(12:19):
in a nationwide survey.
That energy productionis starting to have some
impact on farmland values.
Michael Langemeier (12:25):
Yeah, when we first asked this
question, I did not expectit to be 8 to 10 percent.
I mean, because it, youknow, you hear about this
in local situations, andobviously it's very important.
Land market is verythin in some areas.
It's having a large impact.
But this is nationwide.
And so I did not expectit to be that big.
And so it consists ofwhat you're thinking too.
(12:46):
Strong farm cash flow andlow interest rates were
indicated that those wereimportant factors, but those
are negative right now, andI think that's what we're
picking up here, with thisquestion here, what is
the main reason you expectfarmland prices to rise?
Those are fairly low bars, uh,strong, uh, strong farm cash
flows and low interest rates.
The non farm investment demandis positive and then energy.
(13:06):
And so energy is helping,uh, particularly in, in,
in some local markets.
James Mintert (13:11):
Yeah, and we're certainly seeing some
of that here in Indiana.
Michael Langemeier: Definitely. (13:12):
undefined
James Mintert (13:13):
But it, and it varies state by state in
terms of what impact you'rehaving, but it's interesting.
And, you know, if you lookat some of the research,
those, you know, there's atendency sometimes to think
that those impacts are justgoing to be very local.
But some of the researchwould suggest those
really disseminate, right?
If you want to think ofit in concentric circles,
kind of a relationship.
Michael Langemeier (13:32):
Well, think about how, how, how,
how many miles between, uh,between the different farms,
that individual farm operates.
James Mintert (13:40):
Yeah.
Michael Langemeier (13:41):
So these can be fairly big circles.
James Mintert (13:42):
Yeah.
And of course, from aninvestment standpoint, if
you're going to invest, you'respilling over and looking
for other opportunities.
So, um, a series of questionswe started asking before the
election and then continuedhere after the election,
because we'd learned from 2016and 2020, that Presidential
elections can have a bigimpact on people's outlook.
So, let's just talkabout those results
(14:04):
for a minute, Michael.
So, the first one is, doyou think environmental
regulations impactingagriculture will be
more restrictive, lessrestrictive, or about the
same five years from now?
And the results in NovemberDecember compared to
October are quite striking.
Um, this month inDecember, 61 percent of
the people in the surveysaid they look for those
(14:25):
environmental regulationsaffecting agriculture
to be less restrictiveand less restrictive.
And only 7 percentsaid more restrictive.
If you compare thatback to October, that's
basically upside down.
October was 10 percentsaid they expect to see
less restrictive, uh, um,regulatory environment.
Uh, and 41 percent saidthey expect to see a more
restrictive environment.
(14:47):
Quite striking.
Michael Langemeier (14:47):
Yes.
Elections do matter whenit comes to policy and then
we're, we're picking thatup with this question along
with the two tax questions.
James Mintert (14:55):
Yeah.
So just look atthe tax questions.
The results are very similar.
Uh, if you look at, uh,the question said, do you
think income tax rates forfarms and ranches will be
higher, lower about thesame five years from now.
In October, only 8 percentsaid they expect to see
lower income tax rates.
In both November andDecember, that was up to 36%.
(15:16):
And on the higher end, inOctober, 38 percent said
they thought they wouldsee, we would see higher
tax, income tax rates.
In both November and December,it was, I think in November
it was 9 percent said higherand 7 percent in, in December.
And then when you look atestate taxes, almost the same
thing with respect to whatwe saw for income tax rates.
Uh, only 10 percent ofthe people expect to see
(15:38):
higher, uh, estate taxrates, uh, in December.
Back in October, 40percent said they expect
to see higher tax rates.
So people ask us a lot,why did sentiment improve
following the election?
And the three things we'vebeen able to point to, and
these are not exclusive.
I, there could easily be someother things, but it's clear.
(16:00):
People expect tosee a different
regulatory environment.
They expect to see adifferent tax environment.
Um, then we'll get to thelast one and that's trade.
Uh, how likely do you think U.
S.
agriculture is at risk of atrade war that results in a
significant decrease in U.
S.
ag exports?
And the results, we, we didn'task this before the election.
We asked it inNovember and December.
(16:21):
We didn't think to askthis one in October.
Uh, but the results these lasttwo months, very consistent.
Uh, 48 percent of producersin December said they
think a trade war is eitherlikely or very likely.
That's up a little bit,up from 42 percent who
felt that way in November.
You know, Michael, as I thinkabout why is the barometer a
little bit weaker this monththan it was a month ago,
(16:44):
this might be the reason.
Michael Langemeier (16:45):
Yes, I think it could be.
James Mintert (16:48):
Just this increasing awareness of the
risk of a trade war and ithaving a negative impact on U.
S.
Ag exports.
And then, this is thequestion that you referred
to earlier, Michael, and thatis, Do you think that the
fall 2024 election outcomewill lead to a farm safety
net that is stronger than,weaker than, or about the
same as before the election?
And 55 percent saidthey expect to see a
(17:10):
stronger safety net.
Michael Langemeier (17:12):
I was a little surprised at this one.
I thought it wouldbe, I thought it would
be, uh, positive.
I mean, there would bequite a few people thinking
a stronger safety net.
But really, uh, we'reprobably likely just
going to extend the FarmBill for another year.
And, and even the, even whenyou looked at some of the
Farm Bill, uh, legislation,some of the things that were
going to be in, uh, a new FarmBill, they look very similar.
(17:32):
Uh, and, and so, uh,so this is interesting.
James Mintert (17:36):
So, you and I both do a lot of interviews
after each month's barometer.
And one of the questions thatcame up a month ago when we
were doing interviews was,uh, Do people who say they
expect to see a trade war,and last month it was 42%, uh,
thought a trade war was eitherlikely or very likely, do they
(17:58):
expect government paymentsto make up the difference?
And I kind of think thisquestion points to the
idea is that, yeah, people,a significant portion of
those folks are probablythinking a little bit
like the last time around.
If we have a tradeproblem, we'll probably
have some subsidies.
Michael Langemeier (18:14):
This is bigger than the farm bill.
James Mintert (18:16):
Yeah.
Michael Langemeier (18:16):
It's crop insurance and these,
these trade payments anda lot of other things.
James Mintert (18:22):
So that wraps up the highlights
of this month's survey.
You can get the full report onour website, which is purdue.
edu slash ag barometer.
Uh, and of course, there'salways more details
here on the podcast.
If you're listening tothis podcast, uh, perhaps
while you're traveling,uh, I'd encourage you, if
you have time, to take afew minutes and download
the slide deck that Michaeland I were discussing as we
(18:42):
recorded the podcast, andyou can take a closer look
at some of those charts.
Those are available,uh, always for the, for
the podcast at purdue.
edu slash commercialag.
And so on behalf of the Centerfor Commercial Agriculture
and my colleague MichaelEngemeyer, I'm Jim Minter.
Thanks for joining us.
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