February 4, 2025 • 23 mins
U.S. farmers retained their post-election optimistic outlook at the start of the new year as the January Purdue University-CME Group Ag Economy Barometer Index rose 5 points above a month earlier to a reading of 141. Purdue ag economists James Mintert and Michael Langemeier share some insight into the results of the January 2025 Ag Economy Barometer survey, conducted from January 13-17, in this episode of the Purdue Commercial AgCast. They discuss improvements in farmer sentiment, the impact of higher corn and soybean prices, and farm financial performance. The episode also explores farmers' expectations regarding operating loans, farmland values, and investments in solar energy projects.
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/agcast182.
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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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
James Mintert (00:05):
Welcome to Purdue Commercial AgCast,
the Purdue UniversityCenter for Commercial
Agriculture's podcastfeaturing farm management
news and information.
I'm your host, JamesMintert, Professor
Emeritus of AgriculturalEconomics, and joining me
today is my colleague, Dr.
Michael Langemeier, who'sthe Director of the Center
for Commercial Agricultureand also a Professor of Ag
Economics here at Purdue.
We're going to review theresults from the January
(00:27):
2025, Purdue University-CMEGroup Ag Economy Barometer
survey of farmers fromacross the nation.
Each month, we survey400 farmers across the U.
S.
to learn more abouttheir perspectives
on the ag economy.
This month's ag barometersurvey was conducted
from the 13th throughthe 17th of January.
And Michael, thismonth's index for the
(00:47):
barometer came in at 141.
That's up a little bitcompared to last month.
If you go back toNovember, we were at 145.
October, we were at 115.
And of course, going allthe way back to September,
that index was at 88.
So, we kind of regaineda little bit of the
optimism that we apparentlylost in, in December.
(01:07):
Or you could maybe justsay we moved sideways from
where we were at December.
But from the longer termperspective, we've hung
on to the optimism, right?
We're on that above 140range on the barometer.
Michael Langemeier (01:18):
Yeah, there's been a couple
developments, actually,since the December survey.
One of those is that Icertainly think we had
some strengthening ofcorn prices in particular,
but also soybean prices.
But also, the continuingresolution that was passed
in late December providessome payments for corn
and soybean producers.
And so I think that helped,you know, helped keep people
(01:39):
relatively optimistic..
James Mintert (01:41):
Yeah, that's a good point.
And we saw a littlebit of a bump up in the
Current Condition Index.
It was up to 109.
And for perspective, ifyou go back to September,
that index had dippedall the way down to 75.
So I think that, uh, You raisea good point with respect
to not only the improvementwe saw in corn and soybean
prices from December toJanuary, but also those
payments for the 2024 crop forsoybeans, uh, corn and wheat.
(02:06):
Uh, and those are goingto be significant.
So that probably contributedto some of the optimism that
we picked up in the survey.
And if you look at, uh,you know, the Future
Expectation Index, itcontinues to be way above
the Current Condition Index.
That Future ExpectationIndex is at 156.
Current conditions at 109.
What's your take?
Michael Langemeier (02:26):
I don't see that changing any time
soon and unless we maybe wehave an advent of a trade
war or something like that.
But but I think it's goingto stay elevated for a while.
James Mintert (02:37):
Yeah.
And it really goes backto the election and people
becoming more optimisticabout the future as a
result of the election.
And you know, we'vesurveyed a couple of times
now with respect to why.
And people continue topoint to the same things.
We didn't include thosequestions in this month's
survey, but in prior month'ssurvey, people pointed to
expectations for a betterregulatory environment and
(03:00):
a better tax environment,and particularly, uh, with
respect to their expectations.
And I think that's reallycontributed to this idea
that the future's going tobe better than the past.
Um, the Farm FinancialPerformance Index rose, I
would argue, significantly.
It was at 98 a month ago.
This month, it's at 111.
And so, you know, it'snot a huge move, but it's,
it's large enough to saythere's a difference there.
(03:22):
And as you look atthose numbers, again,
what's your take?
Michael Langemeier (03:27):
I, I think, again, I point back
to the relatively strongercorn and soybean prices and
those, and those paymentsand the continuing resolution
is, is really helping,uh, not only '24, but also
the prospects for '25.
James Mintert (03:39):
Yeah, I think people just feel a
little better about thecurrent condition and that
translated into a betterFinancial Performance Index.
Um, we It's useful sometimesto look, not just at the
index, but actually lookat the question that
the index is based on.
And so the question is,as of today, do you expect
your farm's financialperformance to be better
than, worse than, or aboutthe same as last year?
And when you look atthe raw responses, there
(04:00):
was an increase in thepercentage of people
who said about the same.
That's now above 60%.
But if you look at these lastseveral months, what you can
really notice is the change inthe percentage of people who
say they think, they expectto see better performance.
Going back to August, I thinkonly 11 percent of the people
in the survey said better.
(04:22):
Um, these last threemonths, it's been over
20 percent this month.
It was a 24 last month.
It was a 21.
Going back toNovember, it was a 25.
So there was a jumpthere on the in the green
bars, the positive bars.
And correspondingly,fewer people say worse.
You know, you go back to,um, August and September
we were at 39 percentin August and 45 percent
(04:45):
in September said worse.
And now we're down to what?
13%.
Michael Langemeier (04:49):
Yeah, the worse is really glaring.
I mean, you had 45 percentthere in September, and
now we're down to 13%.
And so that justtells you a lot.
Uh, you know, about aboutthe difference in what
people are expecting for'24 and '25 for that matter.
James Mintert (05:01):
Yeah, looking ahead, they really
do think it's going tobe better going forward.
Um, so every year going backto 2020, we've been asking a
question about operating loansand the characterization of
those loans to get a handleon whether or not there's any
financial stress out there.
So the two questions thatwe've asked for five years in
a row now, actually six yearsin a row, uh, compared to
(05:24):
last year, do you expect thesize of your farm's operating
loan to be larger, smaller,about the same as this year?
Um, 18 percent of thepeople in the survey said
they expect to see or havea larger operating loan.
A year ago, that was 15%.
So statistically really nodifference between those two.
You go back to 2022.
(05:44):
That was a 27%.
Of course, in '22 and '23,we were picking up this idea
of high input cost and thatwas really starting to push
those operating loans up.
We're not pickingthat up this year.
So, then the follow upquestion is what is the
reason for your farm'slarger operating loan?
So this question onlygoes to people who told us
(06:04):
previously they expected tohave a larger operating loan.
I'll let you characterizethose results.
I think they'rekind of interesting.
Michael Langemeier (06:10):
I think they're very interesting.
I mean, we, 23% indicated thattheir, their, their operating
loans can be larger becauseof unpaid operator debt.
Last year that was 17% and,and, and '23 that was 5%.
So certainly, uh, comparedto the '23 number, that's
a substantial increase.
And, and you combine theunpaid operator debt.
Uh, with the, and, and thepercentage of those that
(06:32):
haven't have a, are havinga larger operating loan.
Uh, it indicates that there'smore financial stress this
year than, than there waslast year and certainly
more than there was in '23.
Having said that, Ithink we also need to
go back and compare itto, to 2020 for example.
Back in 2020, 35 percentsaid they had a higher,
uh, operating loanthis year because of
(06:53):
unpaid operator debt.
And so even though financialstress is, looks like it's
a little higher right now,it's It's still lower than
what it was, uh, in 2020.
And we, and we have to thinkback that we went through a
period from 2014 to 2019 withrelatively low net income.
And so back in 2020, uh,liquidity was, was not
real strong, uh, and wehad, and we had more people
(07:14):
that were having troublepaying their operating debt.
And so we're certainlynot back in that situation
yet, but we are movingin the wrong direction.
James Mintert (07:22):
Yeah, I'm glad you went back to 2020
because a lot of times youdo these comparisons, there's
a strong tendency to lookat last year and maybe two
years ago, but you're rightcoming off of that 2020
era, that was coming off offour or five really pretty
challenging years, especiallyin the for corn crop
producers in that environment.
And that gave us more stressthan what we've got today.
(07:43):
But when I compare thisyear's results to two
years ago, I can tellthe difference, right?
There's, and this isconsistent with what we
pick up when we talk tobankers, for example.
Michael Langemeier: We're, we're still (07:51):
undefined
collecting, they're stillcollecting information
at the national level andalso, also University of
Minnesota and FINBIN on,on the current ratio.
Uh, I think there's goingto be a corresponding drop
in the current ratio whenthe '24 numbers come in.
James Mintert (08:03):
Yeah, so
Michael Langemeier (08:04):
It's still going still to be
higher than the 2020.
But it's going to be,it's going to be down
substantially from 2022.
It's very consistentwith our results here.
James Mintert (08:12):
Yeah, and we know from talking to
farmers individually as wellas people in the ag lending
community that working capitaleroded pretty substantially
on many crop farms in 2024.
So if you look at theFarm Capital Investment
Index, it came in unchangedfrom last month at 48.
Just for perspective,that index for about three
(08:34):
years now has been floatingbetween a low of about
30 to a high of about 50.
So we're in the high endof the trading range for
the last three years.
You know, the longer termperspective, you go back to
2021, this index was above 90.
So, uh, but this is a morepositive index these last
couple of months, maybe thelast three months, really,
(08:57):
uh, than what we saw reallyfor most of the last two and
half,, almost three years.
Michael Langemeier (09:02):
And I, and I point to that, that
increase in the Index ofFuture Expectations, you look
at capital investments, you'renot looking at necessarily
what's happening today.
You're also looking at what'shappening down the road.
And so I think that thatcorresponds with that
that increase in the Indexof Future Expectations.
James Mintert (09:17):
Now, I have to say, if you look at
things like tractor salesand combine sales, it
certainly didn't show upeven in the fourth quarter.
As you look at the Associationof Equipment Manufacturers
data, uh, um, those saleswere down substantially, not
only for the year, but thebiggest decline occurred,
uh, in the fourth quarter.
Uh, so, Um, it remains tobe seen whether or not this,
(09:39):
I'll characterize this,what's taking place with
the Capital Investment Indexas a modest improvement.
It remains to be seen ifthat's actually going to
translate into more investmentor people starting to just
maybe think about makingsome of those investments.
Um, so we did somefollow up questions,
actually components here.
So we asked people whosaid it's a bad time to,
um, make investments,make large investments,
(10:01):
you know, why is that?
And when you look atthose results, those
are interesting.
You go back over thelast year, you can see
a change in attitude.
A year ago, 17 percent ofthe people who said it's
a bad time to make largeinvestments said it was
because of uncertaintyabout farm profitability.
These last couple of surveys,actually the really the
(10:21):
last four or five surveys,it's been significantly
higher than that this month.
It was a 26 percentsaying that was
because of uncertaintyabout profitability.
Last month, it was 35%.
November was 20 or 26%.
So you really saw a shiftthere kind of started to show
up in about September, uh,with respect to more people
worrying about profitabilityand saying, we don't have
(10:43):
good enough profitabilityto make these investments.
And then the other factorthat people have pointed
to as a reason to notmake large investments
that's shifted over thecourse of the last year is
the percentage of peoplepointing to interest rates.
A year ago, 34 percent said itwas because of interest rates.
February, it was 38%.
(11:03):
It dipped a littlebit in March.
The last couple of months,it's dropped into the
low 20s, and this monthactually dropped down to
19 percent of the peoplesaid interest rates.
So, compared to a yearago, it's almost not quite
cut in half, in terms ofthe percentage worried
about interest rates.
So, the shift has beenmore towards worrying
about profitability.
(11:25):
And fewer people worryingabout interest rates.
Michael Langemeier (11:27):
And certainly the less concern
about interest rates is goingto help that index, long term.
How much?
You will have to wait and see.
James Mintert (11:38):
Yeah, I think the related factor is, of
course, the Federal Reservecame out after our survey
and said no change in rates.
However, the market isstarting to show evidence
of being worried aboutlong term inflation,
uh, crowding out effect,uh, from large deficits.
And so we're seeing marketrates actually climb.
(11:59):
So, for example, things likemortgage rates have actually
climbed in recent weeks.
Um, so it'll be interestingto see how that plays out.
We always ask peopleabout their expectations
for farmland.
The Short-Term FarmlandIndex, which asks people
to look ahead 12 months,did rise this month.
I think it was up fivepoints to a reading of 115.
That compares to110 a month ago.
(12:19):
Puts it right where itwas in November and just
slightly below where itwas, I think, in October.
October was at 120.
So if you look at the lastthree to four months, kind
of sideways, but positive.
You know, if you go backto, um, I think it was
September, uh, that indexwas actually below 100.
(12:40):
Uh, and for remindlisteners what that means.
If the index drops below100, that means more people
think values are goingdown than are going up.
When it's above 100, you'vegot more people optimistic
about values, uh, than thatare negative about values.
So we're back in thepositive territory.
It's a pretty big swing whenyou compare it back to the
(13:00):
early fall period, right?
Michael Langemeier: Definitely, and there's (13:01):
undefined
about, right at about aquarter of the people, uh,
indicate that they expectland prices to increase.
James Mintert (13:09):
Yeah.
And so, if you think aboutthat, that's, that's a little
bit higher than what we sawin previous months, right?
Yes.
At one point, that wasdown in the teens, right?
Michael Langemeier (13:17):
And so, one of the things that's
happened is we've seen areduction in those that
think it's going to decrease.
Just for the listeners,uh, you know, information.
James Mintert (13:25):
So, for several months in a row now, we've
been asking people aboutwhether or not they think U.
S.
agriculture is at risk of atrade war that results in a
significant decrease in U.
S.
ag exports.
And the There's been alittle bit of a shift here,
Michael, but maybe, maybenot enough to say, uh, any
statistical significance.
This month, 40 percent ofthe respondents said they
(13:49):
think a trade war is eitherlikely or very likely.
A month ago, thatwas at 48%, and in
November, it was at 42%.
So, we're kind of hangingin that 40 percent to not
quite 50 percent range.
I guess my first question,Michael, is do you think there
was a change in attitudesfrom December to January,
or is it just a little bitof noise in the survey.
Michael Langemeier (14:11):
The fact it's 40 percent and
above is a little bitconcerning, obviously.
Another thing, I didn'tlook at this very closely
until now, I'll haveto admit, the unlikely
switched a little bit there.
It was only about 20percent very unlikely
and unlikely in December.
That's moved up to about30%, so that's interesting.
It's kinda like the shiftwent from less people say
(14:33):
likely and very likelyto very unlikely and
unlikely, not neutral.
James Mintert (14:38):
Yeah, that's a good point.
Yeah, because the neutralsare essentially unchanged.
32, 31, and 31 percent overthe 3 months we've asked this.
Michael Langemeier (14:44):
And so maybe, maybe they're thinking
there's going to be a safetynet there, and so even if
this happens, it's not goingto be that problematic.
James Mintert (14:50):
We didn't ask about the safety net this
month, but a month ago andthen the December survey
I think 55 percent of thepeople said they expected the
farm safety net to increasefollowing the 2024 election.
So we'll ask that again innext month's survey and see
what people have to say aboutthat but yeah, as I look at
(15:11):
it people are worried aboutthe risk of a trade war.
But there appears to bethis underlying perspective
that the last time we hada trade war, we received
significant government supportand then expectation that
maybe we'll see that again.
Um, we've been asking thisquestion, I think, uh,
actually goes back, I think,two years now, Michael.
Looking ahead to next year,what are your biggest concerns
(15:33):
for your farming operation?
And higher input cost is, isby far and away number one.
Thirty nine percentsaid higher input cost.
Lower crop and livestockprices was at 24.
A little bit of a shift therecompared to prior months,
uh, with more people worriedabout higher input cost.
Some of that could berelated to the fact that in
January, what are you doing?
(15:54):
You're buying inputs, right?
So you're very cognizantof what those inputs cost
and you're very cognizantof how high they are.
Um, the other thing tothink about is, um, in some
related work, you and I havebeen talking about this.
We've both been looking athow input prices have changed
over the last several years.
And for a lot of people,the anchor point in terms
(16:15):
of what they think about,you know, is normal.
It probably goes back tothat pre covid period.
I was looking at some workthat I did earlier this
week comparing input pricesfor fertilizer and diesel
fuel to what they were backin 2019 before covid hit.
And you know, we've seen alot of gyration, those input
(16:36):
prices really took off.
They have come down sincethen, but they have not come
down as much as crop prices.
And that's the rub fora lot of producers.
Michael Langemeier: Yeah, and that's true. (16:45):
undefined
A lot of, a lot of the costs,the one that's, that's came
down, came down a little bit,that's been providing a little
bit of, of help is nitrogen.
Uh, but when you look atthe, when you look at the
'25 budget and you compareit to the '24 budget,
the fertilizer cost isnot that much different.
And it's, it's stillhigher, like you said,
it's still higher thanwhere we were back in '21.
James Mintert (17:06):
Yeah, and we're using those input prices for
fertilizer and diesel fuelprimarily because USDA reports
those every couple of weekswith a survey of Illinois
retail locations, so we'vegot updated information there.
But the other factor thatfarmers are facing right
now when they make thoseinput decisions is, I can't
think of a single otherinput that has come down.
They've actually continuedto go up with inflation.
Michael Langemeier: That's the problem. (17:28):
undefined
When you look at the USDANASS overall input price
index, it's flat year to year.
And, and flat means we'restill up, up at those higher
prices, uh, compared to '21.
And, and there's, andthere's costs like repairs
and, and machinery that arejust, just really stubborn.
They're not comingdown very fast.
James Mintert (17:48):
I'd argue they're not
coming down at all.
Michael Langemeier (17:50):
You could, you could be right.
James Mintert (17:52):
At least in most locations.
So the help we've gottenon the cost side really
has come, almost I wouldargue say exclusively
from fertilizer and tosome extent diesel fuel.
Um, so.
No surprise.
So, uh, Periodically,we've asked people about
leasing a farmland for solarenergy production, and it
(18:13):
continues to be a topicof interest across much
of the country, especiallyhere in the Corn Belt, but
actually much of the country.
So a couple of questions here.
The first one is, haveyou actively engaged in
discussions with any companiesabout leasing farmland you
own for the installationof a solar energy project
to generate electricity?
This month, 11 percent ofthe respondents said yes.
(18:33):
The last time we asked thisquestion was back in July.
It was 8 percent then.
We had a string lastspring of April, May and
June when that was higher.
We had between 16 and 20percent of the people in
those surveys telling us thatthey had had the discussions.
So, you know, maybe comparedto last spring, fewer
people having discussions.
(18:55):
That 8 to 11% Uh, fromlast summer and now here in
January is pretty consistentwith the prior questions
that we asked going allthe way back to 2021.
And you know, I didn't averagethis Michael exactly, but it
would probably average outto about 10 to 12 percent
if I looked excluded thosethree high months we had.
So, um, that gives you alittle bit of perspective.
(19:16):
And then the follow upquestion is, if you've
engaged in a discussion,we ask about the rates
that are being offered.
So the question is, what isthe annual payment rate per
acre you were offered tolease some of your farmland
for the installation ofa solar energy project
to generate electricity?
And this is really pointingtowards the amount of money
you would receive on anannual basis per acre when the
(19:36):
solar field is in production.
So a lot of these, well,all the solar leases
I'm familiar with havemultiple payment periods.
One's a, typically adevelopment period, a
construction period, and thenthe actual operational period.
So this is referring tothe operational payment.
Period.
And there has beena shift there.
Um, you know, we've actuallyhad to change how we
(19:58):
give the answers to thisquestion to capture the
higher rates because inthe early days, the vast
majority of responses wereat $1,000 per acre or less.
That's really started toshift, and if you look at
the most recent results, 26percent of the people who had
a discussion, roughly 1 outof 4, said they were offered
(20:19):
$1,500 or more per acre.
Another 14 percent said theywere offered 1, 250 to 1, 500.
And I think just 2 percentsaid they were in the
1, 000 to 1, 250 range.
So you add thosetogether, Michael, and
you wind up with what?
I think 42 percent ofthe people were offered
over $1,000 an acre.
And the biggest chunk of thoseare actually above 1, 500.
(20:41):
What's your take?
Michael Langemeier (20:43):
It's always interesting to
see the wide dispersionin these rates and it
brings up a couple points.
There's probably differenceregional, which we can't
pick up because we don't askinformation about regional
differences, but the mainpoint I want to bring
up is do your homework.
Just because you'requoted a rate, it might
seem really good comparedto your cash rent.
(21:03):
Try to find out what otherpeople have been offered,
if at all possible, becausethe rates vary tremendously.
James Mintert (21:11):
Yeah, that's a good point.
The companies, uh,
Michael Langemeier (21:12):
I know.
It's hard that information.
James Mintert (21:14):
They tried, they tried, they discouraged
that because if you signone of the agreements, uh,
many of the agreements, uh,include a non disclosure
agreement with respect tothe rates, but that doesn't
apply prior to signing.
So, yeah.
And, of course, uh, I thinkfor most people it would
behoove you to engage inprofessional help in terms
of negotiating these leases.
(21:34):
Because there's a lotmore to the lease than
just the dollar amount.
And so you really want tothink about a lot of the
details with respect to,um, how the land would be
managed, et cetera, andhow the payments would be
take, uh, you know, howmany acres would actually
be paid on and so forth.
So there's a lot of detailsto think about, but as,
as we look at our surveysand it goes back to 2021
(21:55):
now, so we'll be, um,later this spring, it'll
be four years of data.
There's clearly been ashift in the payments.
The payments have shiftedto the higher dollar values.
Um, whether or not thatcontinues to be true with
the new administration andperhaps, uh, perhaps less
emphasis on, uh, solarenergy production, well, what
remains to be seen, but that'scertainly the story that
(22:17):
we've been picking up so far.
And then, um, you know,we asked a question,
percentage of respondentswho discussed solar leasing
with a company reportedbeing offered a lease rate
of a thousand more per acre.
We've got a chart for those ofyou that download the charts,
it's kind of interesting.
If you go back to, uh, 2021,June of 2021, the first time
we actually asked questionsabout these rates, uh,
(22:40):
27 percent said they wereoffered a lease rate of a
thousand or more per acre.
This month, 51 percent ofthe people who engaged in
a discussion were offeredover $1,000 an acre.
So, um, interesting.
Interesting how that shiftedand you can really see that
when you look at that chart.
Well, Michael, thatwraps up the highlights
(23:00):
of this month's survey.
You can get the full report onour website, which is purdue.
edu slash agbarometer.
And, of course, you candownload the slides that
Michael and I were lookingat as we, uh, recorded
this podcast, and ofcourse, there's a complete
library of charts availableon the, on the website
individually as well.
So on behalf ofmy colleague, Dr.
(23:21):
Michael Langemeier andthe Center for Commercial
Agriculture, I'm Jim Mintert.
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, JamesMintert, Professor
Emeritus of AgriculturalEconomics, and joining me
today is my colleague, Dr.
Michael Langemeier, who'sthe Director of the Center
for Commercial Agricultureand also a Professor of Ag
Economics here at Purdue.
We're going to review theresults from the January
(00:27):
2025, Purdue University-CMEGroup Ag Economy Barometer
survey of farmers fromacross the nation.
Each month, we survey400 farmers across the U.
S.
to learn more abouttheir perspectives
on the ag economy.
This month's ag barometersurvey was conducted
from the 13th throughthe 17th of January.
And Michael, thismonth's index for the
(00:47):
barometer came in at 141.
That's up a little bitcompared to last month.
If you go back toNovember, we were at 145.
October, we were at 115.
And of course, going allthe way back to September,
that index was at 88.
So, we kind of regaineda little bit of the
optimism that we apparentlylost in, in December.
(01:07):
Or you could maybe justsay we moved sideways from
where we were at December.
But from the longer termperspective, we've hung
on to the optimism, right?
We're on that above 140range on the barometer.
Michael Langemeier (01:18):
Yeah, there's been a couple
developments, actually,since the December survey.
One of those is that Icertainly think we had
some strengthening ofcorn prices in particular,
but also soybean prices.
But also, the continuingresolution that was passed
in late December providessome payments for corn
and soybean producers.
And so I think that helped,you know, helped keep people
(01:39):
relatively optimistic..
James Mintert (01:41):
Yeah, that's a good point.
And we saw a littlebit of a bump up in the
Current Condition Index.
It was up to 109.
And for perspective, ifyou go back to September,
that index had dippedall the way down to 75.
So I think that, uh, You raisea good point with respect
to not only the improvementwe saw in corn and soybean
prices from December toJanuary, but also those
payments for the 2024 crop forsoybeans, uh, corn and wheat.
(02:06):
Uh, and those are goingto be significant.
So that probably contributedto some of the optimism that
we picked up in the survey.
And if you look at, uh,you know, the Future
Expectation Index, itcontinues to be way above
the Current Condition Index.
That Future ExpectationIndex is at 156.
Current conditions at 109.
What's your take?
Michael Langemeier (02:26):
I don't see that changing any time
soon and unless we maybe wehave an advent of a trade
war or something like that.
But but I think it's goingto stay elevated for a while.
James Mintert (02:37):
Yeah.
And it really goes backto the election and people
becoming more optimisticabout the future as a
result of the election.
And you know, we'vesurveyed a couple of times
now with respect to why.
And people continue topoint to the same things.
We didn't include thosequestions in this month's
survey, but in prior month'ssurvey, people pointed to
expectations for a betterregulatory environment and
(03:00):
a better tax environment,and particularly, uh, with
respect to their expectations.
And I think that's reallycontributed to this idea
that the future's going tobe better than the past.
Um, the Farm FinancialPerformance Index rose, I
would argue, significantly.
It was at 98 a month ago.
This month, it's at 111.
And so, you know, it'snot a huge move, but it's,
it's large enough to saythere's a difference there.
(03:22):
And as you look atthose numbers, again,
what's your take?
Michael Langemeier (03:27):
I, I think, again, I point back
to the relatively strongercorn and soybean prices and
those, and those paymentsand the continuing resolution
is, is really helping,uh, not only '24, but also
the prospects for '25.
James Mintert (03:39):
Yeah, I think people just feel a
little better about thecurrent condition and that
translated into a betterFinancial Performance Index.
Um, we It's useful sometimesto look, not just at the
index, but actually lookat the question that
the index is based on.
And so the question is,as of today, do you expect
your farm's financialperformance to be better
than, worse than, or aboutthe same as last year?
And when you look atthe raw responses, there
(04:00):
was an increase in thepercentage of people
who said about the same.
That's now above 60%.
But if you look at these lastseveral months, what you can
really notice is the change inthe percentage of people who
say they think, they expectto see better performance.
Going back to August, I thinkonly 11 percent of the people
in the survey said better.
(04:22):
Um, these last threemonths, it's been over
20 percent this month.
It was a 24 last month.
It was a 21.
Going back toNovember, it was a 25.
So there was a jumpthere on the in the green
bars, the positive bars.
And correspondingly,fewer people say worse.
You know, you go back to,um, August and September
we were at 39 percentin August and 45 percent
(04:45):
in September said worse.
And now we're down to what?
13%.
Michael Langemeier (04:49):
Yeah, the worse is really glaring.
I mean, you had 45 percentthere in September, and
now we're down to 13%.
And so that justtells you a lot.
Uh, you know, about aboutthe difference in what
people are expecting for'24 and '25 for that matter.
James Mintert (05:01):
Yeah, looking ahead, they really
do think it's going tobe better going forward.
Um, so every year going backto 2020, we've been asking a
question about operating loansand the characterization of
those loans to get a handleon whether or not there's any
financial stress out there.
So the two questions thatwe've asked for five years in
a row now, actually six yearsin a row, uh, compared to
(05:24):
last year, do you expect thesize of your farm's operating
loan to be larger, smaller,about the same as this year?
Um, 18 percent of thepeople in the survey said
they expect to see or havea larger operating loan.
A year ago, that was 15%.
So statistically really nodifference between those two.
You go back to 2022.
(05:44):
That was a 27%.
Of course, in '22 and '23,we were picking up this idea
of high input cost and thatwas really starting to push
those operating loans up.
We're not pickingthat up this year.
So, then the follow upquestion is what is the
reason for your farm'slarger operating loan?
So this question onlygoes to people who told us
(06:04):
previously they expected tohave a larger operating loan.
I'll let you characterizethose results.
I think they'rekind of interesting.
Michael Langemeier (06:10):
I think they're very interesting.
I mean, we, 23% indicated thattheir, their, their operating
loans can be larger becauseof unpaid operator debt.
Last year that was 17% and,and, and '23 that was 5%.
So certainly, uh, comparedto the '23 number, that's
a substantial increase.
And, and you combine theunpaid operator debt.
Uh, with the, and, and thepercentage of those that
(06:32):
haven't have a, are havinga larger operating loan.
Uh, it indicates that there'smore financial stress this
year than, than there waslast year and certainly
more than there was in '23.
Having said that, Ithink we also need to
go back and compare itto, to 2020 for example.
Back in 2020, 35 percentsaid they had a higher,
uh, operating loanthis year because of
(06:53):
unpaid operator debt.
And so even though financialstress is, looks like it's
a little higher right now,it's It's still lower than
what it was, uh, in 2020.
And we, and we have to thinkback that we went through a
period from 2014 to 2019 withrelatively low net income.
And so back in 2020, uh,liquidity was, was not
real strong, uh, and wehad, and we had more people
(07:14):
that were having troublepaying their operating debt.
And so we're certainlynot back in that situation
yet, but we are movingin the wrong direction.
James Mintert (07:22):
Yeah, I'm glad you went back to 2020
because a lot of times youdo these comparisons, there's
a strong tendency to lookat last year and maybe two
years ago, but you're rightcoming off of that 2020
era, that was coming off offour or five really pretty
challenging years, especiallyin the for corn crop
producers in that environment.
And that gave us more stressthan what we've got today.
(07:43):
But when I compare thisyear's results to two
years ago, I can tellthe difference, right?
There's, and this isconsistent with what we
pick up when we talk tobankers, for example.
Michael Langemeier: We're, we're still (07:51):
undefined
collecting, they're stillcollecting information
at the national level andalso, also University of
Minnesota and FINBIN on,on the current ratio.
Uh, I think there's goingto be a corresponding drop
in the current ratio whenthe '24 numbers come in.
James Mintert (08:03):
Yeah, so
Michael Langemeier (08:04):
It's still going still to be
higher than the 2020.
But it's going to be,it's going to be down
substantially from 2022.
It's very consistentwith our results here.
James Mintert (08:12):
Yeah, and we know from talking to
farmers individually as wellas people in the ag lending
community that working capitaleroded pretty substantially
on many crop farms in 2024.
So if you look at theFarm Capital Investment
Index, it came in unchangedfrom last month at 48.
Just for perspective,that index for about three
(08:34):
years now has been floatingbetween a low of about
30 to a high of about 50.
So we're in the high endof the trading range for
the last three years.
You know, the longer termperspective, you go back to
2021, this index was above 90.
So, uh, but this is a morepositive index these last
couple of months, maybe thelast three months, really,
(08:57):
uh, than what we saw reallyfor most of the last two and
half,, almost three years.
Michael Langemeier (09:02):
And I, and I point to that, that
increase in the Index ofFuture Expectations, you look
at capital investments, you'renot looking at necessarily
what's happening today.
You're also looking at what'shappening down the road.
And so I think that thatcorresponds with that
that increase in the Indexof Future Expectations.
James Mintert (09:17):
Now, I have to say, if you look at
things like tractor salesand combine sales, it
certainly didn't show upeven in the fourth quarter.
As you look at the Associationof Equipment Manufacturers
data, uh, um, those saleswere down substantially, not
only for the year, but thebiggest decline occurred,
uh, in the fourth quarter.
Uh, so, Um, it remains tobe seen whether or not this,
(09:39):
I'll characterize this,what's taking place with
the Capital Investment Indexas a modest improvement.
It remains to be seen ifthat's actually going to
translate into more investmentor people starting to just
maybe think about makingsome of those investments.
Um, so we did somefollow up questions,
actually components here.
So we asked people whosaid it's a bad time to,
um, make investments,make large investments,
(10:01):
you know, why is that?
And when you look atthose results, those
are interesting.
You go back over thelast year, you can see
a change in attitude.
A year ago, 17 percent ofthe people who said it's
a bad time to make largeinvestments said it was
because of uncertaintyabout farm profitability.
These last couple of surveys,actually the really the
(10:21):
last four or five surveys,it's been significantly
higher than that this month.
It was a 26 percentsaying that was
because of uncertaintyabout profitability.
Last month, it was 35%.
November was 20 or 26%.
So you really saw a shiftthere kind of started to show
up in about September, uh,with respect to more people
worrying about profitabilityand saying, we don't have
(10:43):
good enough profitabilityto make these investments.
And then the other factorthat people have pointed
to as a reason to notmake large investments
that's shifted over thecourse of the last year is
the percentage of peoplepointing to interest rates.
A year ago, 34 percent said itwas because of interest rates.
February, it was 38%.
(11:03):
It dipped a littlebit in March.
The last couple of months,it's dropped into the
low 20s, and this monthactually dropped down to
19 percent of the peoplesaid interest rates.
So, compared to a yearago, it's almost not quite
cut in half, in terms ofthe percentage worried
about interest rates.
So, the shift has beenmore towards worrying
about profitability.
(11:25):
And fewer people worryingabout interest rates.
Michael Langemeier (11:27):
And certainly the less concern
about interest rates is goingto help that index, long term.
How much?
You will have to wait and see.
James Mintert (11:38):
Yeah, I think the related factor is, of
course, the Federal Reservecame out after our survey
and said no change in rates.
However, the market isstarting to show evidence
of being worried aboutlong term inflation,
uh, crowding out effect,uh, from large deficits.
And so we're seeing marketrates actually climb.
(11:59):
So, for example, things likemortgage rates have actually
climbed in recent weeks.
Um, so it'll be interestingto see how that plays out.
We always ask peopleabout their expectations
for farmland.
The Short-Term FarmlandIndex, which asks people
to look ahead 12 months,did rise this month.
I think it was up fivepoints to a reading of 115.
That compares to110 a month ago.
(12:19):
Puts it right where itwas in November and just
slightly below where itwas, I think, in October.
October was at 120.
So if you look at the lastthree to four months, kind
of sideways, but positive.
You know, if you go backto, um, I think it was
September, uh, that indexwas actually below 100.
(12:40):
Uh, and for remindlisteners what that means.
If the index drops below100, that means more people
think values are goingdown than are going up.
When it's above 100, you'vegot more people optimistic
about values, uh, than thatare negative about values.
So we're back in thepositive territory.
It's a pretty big swing whenyou compare it back to the
(13:00):
early fall period, right?
Michael Langemeier: Definitely, and there's (13:01):
undefined
about, right at about aquarter of the people, uh,
indicate that they expectland prices to increase.
James Mintert (13:09):
Yeah.
And so, if you think aboutthat, that's, that's a little
bit higher than what we sawin previous months, right?
Yes.
At one point, that wasdown in the teens, right?
Michael Langemeier (13:17):
And so, one of the things that's
happened is we've seen areduction in those that
think it's going to decrease.
Just for the listeners,uh, you know, information.
James Mintert (13:25):
So, for several months in a row now, we've
been asking people aboutwhether or not they think U.
S.
agriculture is at risk of atrade war that results in a
significant decrease in U.
S.
ag exports.
And the There's been alittle bit of a shift here,
Michael, but maybe, maybenot enough to say, uh, any
statistical significance.
This month, 40 percent ofthe respondents said they
(13:49):
think a trade war is eitherlikely or very likely.
A month ago, thatwas at 48%, and in
November, it was at 42%.
So, we're kind of hangingin that 40 percent to not
quite 50 percent range.
I guess my first question,Michael, is do you think there
was a change in attitudesfrom December to January,
or is it just a little bitof noise in the survey.
Michael Langemeier (14:11):
The fact it's 40 percent and
above is a little bitconcerning, obviously.
Another thing, I didn'tlook at this very closely
until now, I'll haveto admit, the unlikely
switched a little bit there.
It was only about 20percent very unlikely
and unlikely in December.
That's moved up to about30%, so that's interesting.
It's kinda like the shiftwent from less people say
(14:33):
likely and very likelyto very unlikely and
unlikely, not neutral.
James Mintert (14:38):
Yeah, that's a good point.
Yeah, because the neutralsare essentially unchanged.
32, 31, and 31 percent overthe 3 months we've asked this.
Michael Langemeier (14:44):
And so maybe, maybe they're thinking
there's going to be a safetynet there, and so even if
this happens, it's not goingto be that problematic.
James Mintert (14:50):
We didn't ask about the safety net this
month, but a month ago andthen the December survey
I think 55 percent of thepeople said they expected the
farm safety net to increasefollowing the 2024 election.
So we'll ask that again innext month's survey and see
what people have to say aboutthat but yeah, as I look at
(15:11):
it people are worried aboutthe risk of a trade war.
But there appears to bethis underlying perspective
that the last time we hada trade war, we received
significant government supportand then expectation that
maybe we'll see that again.
Um, we've been asking thisquestion, I think, uh,
actually goes back, I think,two years now, Michael.
Looking ahead to next year,what are your biggest concerns
(15:33):
for your farming operation?
And higher input cost is, isby far and away number one.
Thirty nine percentsaid higher input cost.
Lower crop and livestockprices was at 24.
A little bit of a shift therecompared to prior months,
uh, with more people worriedabout higher input cost.
Some of that could berelated to the fact that in
January, what are you doing?
(15:54):
You're buying inputs, right?
So you're very cognizantof what those inputs cost
and you're very cognizantof how high they are.
Um, the other thing tothink about is, um, in some
related work, you and I havebeen talking about this.
We've both been looking athow input prices have changed
over the last several years.
And for a lot of people,the anchor point in terms
(16:15):
of what they think about,you know, is normal.
It probably goes back tothat pre covid period.
I was looking at some workthat I did earlier this
week comparing input pricesfor fertilizer and diesel
fuel to what they were backin 2019 before covid hit.
And you know, we've seen alot of gyration, those input
(16:36):
prices really took off.
They have come down sincethen, but they have not come
down as much as crop prices.
And that's the rub fora lot of producers.
Michael Langemeier: Yeah, and that's true. (16:45):
undefined
A lot of, a lot of the costs,the one that's, that's came
down, came down a little bit,that's been providing a little
bit of, of help is nitrogen.
Uh, but when you look atthe, when you look at the
'25 budget and you compareit to the '24 budget,
the fertilizer cost isnot that much different.
And it's, it's stillhigher, like you said,
it's still higher thanwhere we were back in '21.
James Mintert (17:06):
Yeah, and we're using those input prices for
fertilizer and diesel fuelprimarily because USDA reports
those every couple of weekswith a survey of Illinois
retail locations, so we'vegot updated information there.
But the other factor thatfarmers are facing right
now when they make thoseinput decisions is, I can't
think of a single otherinput that has come down.
They've actually continuedto go up with inflation.
Michael Langemeier: That's the problem. (17:28):
undefined
When you look at the USDANASS overall input price
index, it's flat year to year.
And, and flat means we'restill up, up at those higher
prices, uh, compared to '21.
And, and there's, andthere's costs like repairs
and, and machinery that arejust, just really stubborn.
They're not comingdown very fast.
James Mintert (17:48):
I'd argue they're not
coming down at all.
Michael Langemeier (17:50):
You could, you could be right.
James Mintert (17:52):
At least in most locations.
So the help we've gottenon the cost side really
has come, almost I wouldargue say exclusively
from fertilizer and tosome extent diesel fuel.
Um, so.
No surprise.
So, uh, Periodically,we've asked people about
leasing a farmland for solarenergy production, and it
(18:13):
continues to be a topicof interest across much
of the country, especiallyhere in the Corn Belt, but
actually much of the country.
So a couple of questions here.
The first one is, haveyou actively engaged in
discussions with any companiesabout leasing farmland you
own for the installationof a solar energy project
to generate electricity?
This month, 11 percent ofthe respondents said yes.
(18:33):
The last time we asked thisquestion was back in July.
It was 8 percent then.
We had a string lastspring of April, May and
June when that was higher.
We had between 16 and 20percent of the people in
those surveys telling us thatthey had had the discussions.
So, you know, maybe comparedto last spring, fewer
people having discussions.
(18:55):
That 8 to 11% Uh, fromlast summer and now here in
January is pretty consistentwith the prior questions
that we asked going allthe way back to 2021.
And you know, I didn't averagethis Michael exactly, but it
would probably average outto about 10 to 12 percent
if I looked excluded thosethree high months we had.
So, um, that gives you alittle bit of perspective.
(19:16):
And then the follow upquestion is, if you've
engaged in a discussion,we ask about the rates
that are being offered.
So the question is, what isthe annual payment rate per
acre you were offered tolease some of your farmland
for the installation ofa solar energy project
to generate electricity?
And this is really pointingtowards the amount of money
you would receive on anannual basis per acre when the
(19:36):
solar field is in production.
So a lot of these, well,all the solar leases
I'm familiar with havemultiple payment periods.
One's a, typically adevelopment period, a
construction period, and thenthe actual operational period.
So this is referring tothe operational payment.
Period.
And there has beena shift there.
Um, you know, we've actuallyhad to change how we
(19:58):
give the answers to thisquestion to capture the
higher rates because inthe early days, the vast
majority of responses wereat $1,000 per acre or less.
That's really started toshift, and if you look at
the most recent results, 26percent of the people who had
a discussion, roughly 1 outof 4, said they were offered
(20:19):
$1,500 or more per acre.
Another 14 percent said theywere offered 1, 250 to 1, 500.
And I think just 2 percentsaid they were in the
1, 000 to 1, 250 range.
So you add thosetogether, Michael, and
you wind up with what?
I think 42 percent ofthe people were offered
over $1,000 an acre.
And the biggest chunk of thoseare actually above 1, 500.
(20:41):
What's your take?
Michael Langemeier (20:43):
It's always interesting to
see the wide dispersionin these rates and it
brings up a couple points.
There's probably differenceregional, which we can't
pick up because we don't askinformation about regional
differences, but the mainpoint I want to bring
up is do your homework.
Just because you'requoted a rate, it might
seem really good comparedto your cash rent.
(21:03):
Try to find out what otherpeople have been offered,
if at all possible, becausethe rates vary tremendously.
James Mintert (21:11):
Yeah, that's a good point.
The companies, uh,
Michael Langemeier (21:12):
I know.
It's hard that information.
James Mintert (21:14):
They tried, they tried, they discouraged
that because if you signone of the agreements, uh,
many of the agreements, uh,include a non disclosure
agreement with respect tothe rates, but that doesn't
apply prior to signing.
So, yeah.
And, of course, uh, I thinkfor most people it would
behoove you to engage inprofessional help in terms
of negotiating these leases.
(21:34):
Because there's a lotmore to the lease than
just the dollar amount.
And so you really want tothink about a lot of the
details with respect to,um, how the land would be
managed, et cetera, andhow the payments would be
take, uh, you know, howmany acres would actually
be paid on and so forth.
So there's a lot of detailsto think about, but as,
as we look at our surveysand it goes back to 2021
(21:55):
now, so we'll be, um,later this spring, it'll
be four years of data.
There's clearly been ashift in the payments.
The payments have shiftedto the higher dollar values.
Um, whether or not thatcontinues to be true with
the new administration andperhaps, uh, perhaps less
emphasis on, uh, solarenergy production, well, what
remains to be seen, but that'scertainly the story that
(22:17):
we've been picking up so far.
And then, um, you know,we asked a question,
percentage of respondentswho discussed solar leasing
with a company reportedbeing offered a lease rate
of a thousand more per acre.
We've got a chart for those ofyou that download the charts,
it's kind of interesting.
If you go back to, uh, 2021,June of 2021, the first time
we actually asked questionsabout these rates, uh,
(22:40):
27 percent said they wereoffered a lease rate of a
thousand or more per acre.
This month, 51 percent ofthe people who engaged in
a discussion were offeredover $1,000 an acre.
So, um, interesting.
Interesting how that shiftedand you can really see that
when you look at that chart.
Well, Michael, thatwraps up the highlights
(23:00):
of this month's survey.
You can get the full report onour website, which is purdue.
edu slash agbarometer.
And, of course, you candownload the slides that
Michael and I were lookingat as we, uh, recorded
this podcast, and ofcourse, there's a complete
library of charts availableon the, on the website
individually as well.
So on behalf ofmy colleague, Dr.
(23:21):
Michael Langemeier andthe Center for Commercial
Agriculture, I'm Jim Mintert.
Thanks for joining us.
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