November 5, 2024 • 18 mins
Farmer sentiment saw an unexpected surge in October ahead of the upcoming U.S. election, according to the latest Purdue University/CME Group Ag Economy Barometer. Purdue ag economists James Mintert and Michael Langemeier share some insight into the results of the October 2024 Ag Economy Barometer survey, conducted from Oct. 14-18, 2024. The Barometer Index rose 27 points to 115, with increases in both the Current Condition Index and the Future Expectation Index. Key insights include farmers' improved optimism about 2025 despite high input costs and lower crop prices. Specific survey responses on financial conditions, investment plans, and farmland value expectations are discussed, alongside their potential influences, such as the upcoming election and policy concerns.
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/agcast178.
You can find the FULL video episode on our YouTube channel. Visit https://youtu.be/EV_0yPgTRnY to subscribe and watch.
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Transcript
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, JamesMinnert, Director of the
Purdue Center for CommercialAgriculture, and joining me
today is my colleague, Dr.
Michael Langemeierwho's a professor of ag
economics here at Purdue,and also the Associate
Director of the Center.
We're going to review theresults from the October
2024 Purdue University-CMEGroup Ag Economy Barometer
(00:29):
survey of farmers fromacross the nation.
Each month, we survey 400farmers across the U.S.
to learn more abouttheir their perspectives
on the ag economy.
This month's Ag Barometersurvey was conducted
from the 14th throughthe 18th of October.
Michael, we got a surprisethis month, a big one.
The Ag Economy BarometerIndex rose 27 points
(00:49):
to a reading of 115.
That's the highestOctober reading for the
barometer since 2021.
And you look at the twosub indices, the Current
Condition Index and theFuture Expectation Index,
they both jumped up as well.
The Current ConditionIndex was up 19 points
compared to last month.
That did leave thatindex still below 100,
(01:09):
uh, left it at 95.
The Future ExpectationIndex jumped 30 points
compared to last month.
And it was the highestreading for that index
since July of 2023.
And it is well above100 at a reading of 124.
So we've got a little bit ofa dichotomy there with respect
to what people are thinking.
Those readings aboveand below 100, I think
(01:30):
are kind of important.
At least we think they are.
Cause that 95 suggests thatpeople think conditions
are a little bit worsethan they were when we
first started collectingdata for the barometer
in late 2015, early 2016.
And, of course, thatFuture Expectation Index
at well above 100 saysthey think it's better.
Michael Langemeier (01:48):
Well, this shift up in both indices is
a bit of a head scratcher.
I mean, certainly we'rein an election cycle.
That probably matters.
It's mattered in the pastin terms of the Ag Economy
Barometer, and it's probablymattering again this time.
Uh, you look this up, uh, todo the report, it, it, we had
slightly higher crop prices,uh, you know, looking at corn
and soybeans specifically,and then we're combining some
(02:09):
pretty good corn and soybeans,and so, all those factors
are important, but I don'tknow if they're big enough to
explain what's going on here.
One of the things that, thatI think might be going on
here is people are a littlemore optimistic about '25,
then perhaps we are, uh,or they're more optimistic
about '25 than they are '24.
James Mintert (02:28):
Yeah, I, I, as you think about the total
responses, the complete setof responses that we received
to the survey this month.
It's clear that there's moreoptimism about the future.
They kind of view the downturnthat we've seen here in
2024 as being transitory,and actually think maybe
we're going to have to see,uh, kind of a rebound of
(02:49):
sorts in 2025, and that'sprobably where they differ
from the two ag economistsdoing this podcast, right?
So we're not thatoptimistic about 2025.
But, um, you know, ifyou look at some of the
individual responses tothe questions that we use
to actually compute thebarometer, those results
are kind of interesting.
Um, the percentage ofproducers who expect
bad times for the U.
(03:09):
S.
ag economy in the upcomingyear declined this
month from 73 percent ofrespondents in September
to 53 percent in October.
But that's still over halfthe people in the survey.
Uh, the percentage ofproducers who expect
bad times for U.
S.
uh, agriculture in generalin the next five years fell
from 48 percent to 33%, sothat fed into our indexes,
(03:32):
but that's still one thirdof the respondents who think
they're gonna see bad times.
Um, this onesurprised me the most.
Just 23 percent of producersexpect their financial
condition to worsenin the next 12 months.
Compared to 38 percent whofelt that way in September.
I found that to be apretty surprising result.
Michael Langemeier (03:53):
I did too, but I think it's consistent
with them thinking that '25 isgoing to be better than '24.
When you do look at, wehave a question that also
looks at '24 compared to'23, and it's clear to
me that they think '24 isnot going to be very good.
Uh, but, but, but certainly,uh, certainly when they start
thinking about '25, they're,they're, they are really
(04:15):
thinking, uh, it's consistentwith many questions in this
survey that, that '25 isgoing to be better than '24.
James Mintert (04:21):
Yeah, and you kind of mentioned that
in comparison of '24 to'23, I think 56 percent
of the respondents thismonth said their farm's
financial condition wasworse than a year earlier.
Michael Langemeier (04:31):
And like 10 percent said better.
James Mintert (04:32):
Yeah, so that kind of confirms what you were
saying about how people feelabout 2024, but it's pretty
clear that they think '25 isgoing to be a better year.
They view this downturn in '24as being kind of transitory.
So one of the things wealways do in the barometer
surveys, if you go all theway through the survey, the
very last question, uh, weallow respondents to just
(04:53):
tell us what's on their mind.
Uh, and so that's an openended question, and our
survey takers kind of jot downwhatever people are saying.
We take those comments, andwe look at them, and we try to
summarize them, and we do itin the form of a word cloud.
And I've included the wordcloud in this month's report.
Because I thoughtit was interesting.
So, the top two thingsin that word cloud were
(05:16):
policy and politics.
And they're probablyabout matched 50-50.
After that, people weretalking about inputs,
and we picked that upelsewhere in the survey.
People are very concernedabout high input cost.
They're concernedabout prices.
I think they'retalking primarily there
about output prices.
Then you see regulation,environment, inflation, Those
(05:40):
are a lot of topics that havea lot to do with an election
that's going to take placein just a few days from when
we record this podcast, andactually it's going to be
released on election day.
Michael Langemeier (05:49):
Yeah, you could argue almost all
the big words on the wordcloud are related to the
policy, environment we're in.
And really, thingscould change depending
on who gets elected ona lot of these topics.
James Mintert (06:01):
So I we're just kind of making a case
for the fact that we boththink the November survey,
which will be conducted aweek after the election, is
going to be very interesting.
It certainly was in2016 and in 2020.
We think it'll beinteresting again this time.
So we continue to ask thequestion, looking ahead
to next year, what areyour biggest concerns
for farming operation?
Still, high input costs andlow crop and livestock prices
(06:23):
are the top two concerns.
Um, as the year hasprogressed, people have become
more and more concerned aboutlow crop and livestock prices.
And of course, the focus ismostly on the crop side there.
And on the third component,the third highest risk, Rising
interest rates, that one'sgone the other direction.
Beginning of the year,roughly one out of four
people were worried aboutrising interest rates.
(06:44):
Um, this survey, Ithink it was 15%.
So, fewer people worriedabout interest rates, but
we are still very concernedabout high input costs.
People worried aboutlocking in high break evens.
And then, correspondingly,getting, uh, kind of a
cost price squeeze becauseof relatively low prices.
So those concerns arestill, this part of the
survey was very consistentwith prior surveys.
(07:05):
Some of the other questions,not so much, right?
Michael Langemeier (07:07):
Yeah, as an example of this, I just
talked to someone recentlywho was very concerned about,
uh, you know, cash rents andwas, and was, was telling
me that his break even, hisbreak even for '25 still
looks, it'd be around $5.
You look at futures prices,they're not anywhere
near 5 corn prices.
James Mintert: Yeah, good point. (07:24):
undefined
Just
Michael Langemeier: brings that home. (07:25):
undefined
James Mintert (07:26):
Yeah.
So if there's an index onthe survey that's shocked
me, it was this one, FarmFinancial Performance Index
went up 22 points in Octoberto 90 from 68 in September.
And you know, if you lookedat that index throughout
2024, it's been on adownward trend really since
(07:48):
the beginning of the year.
Uh, not every single month,but if you draw a trend line,
it's, it's downward sloping.
I did not expect tosee this index go up
at all, truthfully.
I especially didn't expectto see it go up 22 points.
Michael Langemeier (08:01):
I admit, I double triple
checked this number becauseI didn't think it could
go up that much either.
I mean, even in early, earlythis year, we were running
80, slightly above 80.
That seems reasonableto, to me, but we hit 90.
We haven't been in, wehaven't been in 90, in about
10 months, I think it wasDecember '23, the last time
we were at 90 or higher.
(08:23):
And '23 certainly was adifferent period than '24.
James Mintert (08:26):
Yeah, so we really don't
have an explanation forwhat happened, right?
People, except for thefact that people are more
optimistic about what'sgoing to take place in
the future than we are.
I mean, that'sthe bottom line.
Michael Langemeier: That has to be it. (08:35):
undefined
James Mintert (08:36):
Um, the Farm Capital Investment
Index, consistent withsome of the other results
we saw this month, was up.
Up 7 points compared toa month ago, 7 points
higher than a year ago.
Um, That index is still inwhat I'm going to call kind
of a broad trading range, abroad sideways trading range
of about 30 on the low endto 50 or so on the high end.
So we're still in the middleof that, so it didn't break
(08:58):
out of the range, but itwas up, suggesting people
thought it was a littlebetter time to invest
than they did a month ago.
Michael Langemeier (09:03):
And this range has been going on for
quite some time, essentiallysince late '21, and you really
can point to when input costsreally skyrocketed in '21,
that's when this, this, thisnumber really came down and it
really hasn't went up since.
James Mintert (09:18):
So it'll be interesting to
see what happens withthat index next month.
Um, we always follow thatquestion up with a question
about people's plans forfarm machinery purchases
in the upcoming yearcompared to a year ago.
And if you look at the resultsfrom June through September,
they made a lot of sense.
Uh, in 50 June, 53% of thepeople in the survey said
they plan to reduce theirfarm machinery purchases in
(09:42):
the, uh, in the upcoming yearcompared to a year earlier.
And that percentage wasclimbing month after
month through September.
By September, it gotup to 69 percent of the
people in the survey.
This month, thatdropped back to 55%.
Again, that's consistentwith other responses we
received in the survey.
The question I had as I lookedat this is, are they really
(10:03):
going to follow through?
Because what happened isin September, 26 percent of
the people said they weregoing to keep their machinery
purchases about the same.
That jumped to 39percent on this survey.
And so, that's kindof where the shift
really occurred, right?
Uh, the people shifted awayfrom saying, I'm going to
lower my machinery purchasesto saying, I'm going to
keep them about the same.
(10:25):
The question is, arethey going to really
follow through on that?
Michael Langemeier: Yeah, they still just (10:27):
undefined
isn't very optimisticfor machinery purchases.
That's the way, that'sthe way I'd state it.
James Mintert (10:33):
So that was the, that was kind of the
easy way out there, Michael.
Michael Langemeier (10:36):
But that's the way I read it.
And it's hard to readwhat about the same means.
Because we don't, we don'task them, you know, how much
they purchased last year.
So that, that one's kindof hard to read what they,
what we really mean by that.
Or what they, what they thinkthey're, they're implying
by answering about the same.
James Mintert (10:51):
Alright, I'm going to let you go on that.
So, the follow up is also,if you think it's a bad time
to make large investments, weask, why do you feel that way?
And there was a shift in theresponses here in October
compared to September.
In September, the topreason for thinking it's
a bad time to make largeinvestments was uncertainty
about farm profitability.
This month, we kind ofreverted back to some
(11:12):
responses we've gottenpreviously, which was the
focus was very heavy on theincrease in prices that's
taken place for farm machineryand new construction.
39 percent of the peoplein the survey said that was
the number one reason for,uh, thinking it's a bad time
to make large investments.
That's very close in termsof responses we've got over
the course of the summer,like in July and in August.
(11:35):
So, What do you make of that?
Michael Langemeier (11:38):
Well, I, I see, I see where
you're coming from onthat increase in prices.
That, that changed, thatchanged quite a bit.
But also, you know,maybe, maybe because it's
a small group, uh, thatthis isn't that important.
But you also look atuncertainty about farm
profitability dropped from31%, uh, as being, uh, as
being a primary reason fornot making large investments
(11:58):
to 23 percent in October.
That's an 8 percent drop.
And so it's consistent withthis increase in sentiment.
James Mintert (12:04):
Yeah.
Again, It was an optim asurprisingly optimistic survey
this month, um, and they wereconsistent across the board.
So we also ask people whothink it's a good time
to make large investmentswhy they feel that way.
So keep in mind, we don'tget a lot of people in the
survey who say it's a goodtime to make investments.
Uh, I think this month it was15 percent of the respondents,
(12:25):
last month I think it was 13%.
So those folks said thatcompared to the beginning
of 2024, more of them werepointing to high dealer
inventories and new technologyand fewer of them were
pointing to strong cash flowsand their farming operation.
And so to me, the, the twointeresting things were
that shift in strong cashflows, January, 32 percent
(12:47):
of the people said strongcash flows are the reason
we want to make investments.
Uh, that was theirtop reason this month
that was down to 19%.
And then the other kindof related point there was
in, uh, January, 7 percentof the people who said
it's a good time to investpointed to they wanted to
invest in new technology.
This month thatdoubled to 14%.
(13:09):
Now keep in mind with a, ifit's only 15 percent of the
people in our survey, itdoesn't take very many people
to go from 7 percent to 14%,so I don't want to hang my
hat too heavily on that.
But it is kind of interestingif you are thinking it's a
good time to invest, maybetechnology is a motivation.
Michael Langemeier (13:25):
I think part of what's going on here
is, is this is the time thatpeople look, uh, for, for
new, uh, new technology.
This is the time of yearwhere they're looking, uh,
to replace that tractor, orreplace that planter, or some
other, uh, piece of equipment.
And so, and so when they'redoing that, they're probably
noticing, hey, there'ssome, there's some new
technology, uh, associatedwith this new tractor
they didn't have before.
(13:45):
And so, I think that might bepart of what's going on there,
at least that's my hunch.
Uh, but going back to yourstrong cash flows, um,
The strong cash flows wasat 19 percent in October.
I don't hate to sound likea broken record, but that
was up from like below10 percent in September.
So, again, more optimism.
James Mintert: Yeah, good point. (14:06):
undefined
Uh, another surprise, theShort Term Farmland Value
Expectation Index jumped.
Uh, it was 25 points higherthan a month earlier.
Um, and that leaves thatindex only 5 points lower than
it was this time last year.
Again, throughout 2024,that index was kind
of drifting lower.
(14:26):
Which made a lotof sense to us.
Um, the jump this month,consistent with what we saw
elsewhere in the survey,but we're really not sure
why people's perspectiveon farmland values all
of a sudden became alot more optimistic.
And that short run questionis about what's going to
happen in the next 12 months.
Michael Langemeier: This question is usually (14:44):
undefined
consistent with the Indexof Current Conditions.
And so when the Indexof Current Conditions
jumped, usually you wouldexpect to jump in this.
They're not perfectlycorrelated, but they're
strongly, stronglycore correlated.
So I think that's part ofwhat's, what's going on here.
Uh, but this, this resultsurprised me how big this jump
was, I mean, we're talking areally large change in this
(15:07):
index from month to month.
It usually doesn'tchange that much.
James Mintert (15:11):
Yeah.
And I, you mentioned thisearlier, but I mean, the
one thing that might'veinfluenced this a little bit
was the fact that we haveheard so many very positive
yield reports this fall.
Yes.
And, uh, That would maybeprovide a little bit
of a boost, I suppose.
When you ask, uh, lookat the raw responses
to that question, it'skind of interesting.
Uh, the percentage ofproducers who expect
(15:32):
farmland values to rise inthe next 12 months jumped
by 15 points while thepercentage expecting lower
values declined 10 points.
And, of course, that explainswhy the index was up so much.
But, um, when you look atthat on the chart, it's
quite striking, right?
So, uh,
The Long Term Farmland ValueExpectation Index was also up.
It was up 12 points.
(15:53):
Um, that's a pretty bigincrease for that index
because that index is askingpeople to look out five years.
And it usuallydoesn't jump around.
To that magnitude.
Michael Langemeier: No, it doesn't. (16:03):
undefined
And this is a 20 pointincrease since August,
it jumped a lot.
Most of that increase forSeptember to October, but
there was also a jump fromfrom August to September.
And so it's a 20 point changefrom August to October.
And like you said that that's,that's quite unusual, because
here we're talking fiveyear, five year land values,
they don't seem to change.
(16:24):
Expectations don'tchange that much for
long term land values.
James Mintert (16:28):
And I think the other interesting thing
about that index is, if you goback and look at the history,
that 159 reading this monthis close to the all time high.
Uh, the all time high inthat index, I think, is
161, so we're within acouple of points of that.
Uh, again, if you askedme before we did the
survey of what I thoughtwas going to happen, I
(16:48):
did not anticipate beingclose to the all time high.
Michael Langemeier (16:52):
I have to admit that the people
that responded to thesurvey this month are seeing
something different thanI'm seeing with respect
to long run land values.
Because I'm not as,I'm not as optimistic.
I'm not particularlyoptimistic.
I'm not pessimistic, butnot, I'm not as optimistic.
James Mintert (17:04):
So we always follow up and say, if you
think values are going to goup in that five year period,
why do you feel that way?
And those responses arekind of interesting.
The percentage of producerspointing to inflation
did rise this month.
So that was, you know,went from, I think, 15
percent in September to21 percent of them said it
was because of inflation.
Um, the other thing that wecontinue to ask about is, you
(17:26):
know, the impact of, of energyproduction on farmland values.
That was consistent, again,it was at 7 percent of
the people pointing toenergy production, so that
includes wind and solar, so.
That wraps up our resultsfor this month's survey.
Uh, the full reportis available on the
Purdue-CME Group Ag EconomyBarometer website, which
is purdue.edu/agbarometer.
(17:47):
And of course, if you'relistening to this by way
of our website, I justwanted to remind you, you
could subscribe to thePurdue Commercial Ag Cast.
It's available on all themajor podcast providers,
as well as being availableon our website, which is
purdue.edu/commercialag.
And so with that, I wantto thank my colleage, Dr.
Michael Langemeier,for joining us today.
And on behalf of theCenter for Commercial
Agriculture, I'm Jim Mintert.
(18:08):
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, JamesMinnert, Director of the
Purdue Center for CommercialAgriculture, and joining me
today is my colleague, Dr.
Michael Langemeierwho's a professor of ag
economics here at Purdue,and also the Associate
Director of the Center.
We're going to review theresults from the October
2024 Purdue University-CMEGroup Ag Economy Barometer
(00:29):
survey of farmers fromacross the nation.
Each month, we survey 400farmers across the U.S.
to learn more abouttheir their perspectives
on the ag economy.
This month's Ag Barometersurvey was conducted
from the 14th throughthe 18th of October.
Michael, we got a surprisethis month, a big one.
The Ag Economy BarometerIndex rose 27 points
(00:49):
to a reading of 115.
That's the highestOctober reading for the
barometer since 2021.
And you look at the twosub indices, the Current
Condition Index and theFuture Expectation Index,
they both jumped up as well.
The Current ConditionIndex was up 19 points
compared to last month.
That did leave thatindex still below 100,
(01:09):
uh, left it at 95.
The Future ExpectationIndex jumped 30 points
compared to last month.
And it was the highestreading for that index
since July of 2023.
And it is well above100 at a reading of 124.
So we've got a little bit ofa dichotomy there with respect
to what people are thinking.
Those readings aboveand below 100, I think
(01:30):
are kind of important.
At least we think they are.
Cause that 95 suggests thatpeople think conditions
are a little bit worsethan they were when we
first started collectingdata for the barometer
in late 2015, early 2016.
And, of course, thatFuture Expectation Index
at well above 100 saysthey think it's better.
Michael Langemeier (01:48):
Well, this shift up in both indices is
a bit of a head scratcher.
I mean, certainly we'rein an election cycle.
That probably matters.
It's mattered in the pastin terms of the Ag Economy
Barometer, and it's probablymattering again this time.
Uh, you look this up, uh, todo the report, it, it, we had
slightly higher crop prices,uh, you know, looking at corn
and soybeans specifically,and then we're combining some
(02:09):
pretty good corn and soybeans,and so, all those factors
are important, but I don'tknow if they're big enough to
explain what's going on here.
One of the things that, thatI think might be going on
here is people are a littlemore optimistic about '25,
then perhaps we are, uh,or they're more optimistic
about '25 than they are '24.
James Mintert (02:28):
Yeah, I, I, as you think about the total
responses, the complete setof responses that we received
to the survey this month.
It's clear that there's moreoptimism about the future.
They kind of view the downturnthat we've seen here in
2024 as being transitory,and actually think maybe
we're going to have to see,uh, kind of a rebound of
(02:49):
sorts in 2025, and that'sprobably where they differ
from the two ag economistsdoing this podcast, right?
So we're not thatoptimistic about 2025.
But, um, you know, ifyou look at some of the
individual responses tothe questions that we use
to actually compute thebarometer, those results
are kind of interesting.
Um, the percentage ofproducers who expect
bad times for the U.
(03:09):
S.
ag economy in the upcomingyear declined this
month from 73 percent ofrespondents in September
to 53 percent in October.
But that's still over halfthe people in the survey.
Uh, the percentage ofproducers who expect
bad times for U.
S.
uh, agriculture in generalin the next five years fell
from 48 percent to 33%, sothat fed into our indexes,
(03:32):
but that's still one thirdof the respondents who think
they're gonna see bad times.
Um, this onesurprised me the most.
Just 23 percent of producersexpect their financial
condition to worsenin the next 12 months.
Compared to 38 percent whofelt that way in September.
I found that to be apretty surprising result.
Michael Langemeier (03:53):
I did too, but I think it's consistent
with them thinking that '25 isgoing to be better than '24.
When you do look at, wehave a question that also
looks at '24 compared to'23, and it's clear to
me that they think '24 isnot going to be very good.
Uh, but, but, but certainly,uh, certainly when they start
thinking about '25, they're,they're, they are really
(04:15):
thinking, uh, it's consistentwith many questions in this
survey that, that '25 isgoing to be better than '24.
James Mintert (04:21):
Yeah, and you kind of mentioned that
in comparison of '24 to'23, I think 56 percent
of the respondents thismonth said their farm's
financial condition wasworse than a year earlier.
Michael Langemeier (04:31):
And like 10 percent said better.
James Mintert (04:32):
Yeah, so that kind of confirms what you were
saying about how people feelabout 2024, but it's pretty
clear that they think '25 isgoing to be a better year.
They view this downturn in '24as being kind of transitory.
So one of the things wealways do in the barometer
surveys, if you go all theway through the survey, the
very last question, uh, weallow respondents to just
(04:53):
tell us what's on their mind.
Uh, and so that's an openended question, and our
survey takers kind of jot downwhatever people are saying.
We take those comments, andwe look at them, and we try to
summarize them, and we do itin the form of a word cloud.
And I've included the wordcloud in this month's report.
Because I thoughtit was interesting.
So, the top two thingsin that word cloud were
(05:16):
policy and politics.
And they're probablyabout matched 50-50.
After that, people weretalking about inputs,
and we picked that upelsewhere in the survey.
People are very concernedabout high input cost.
They're concernedabout prices.
I think they'retalking primarily there
about output prices.
Then you see regulation,environment, inflation, Those
(05:40):
are a lot of topics that havea lot to do with an election
that's going to take placein just a few days from when
we record this podcast, andactually it's going to be
released on election day.
Michael Langemeier (05:49):
Yeah, you could argue almost all
the big words on the wordcloud are related to the
policy, environment we're in.
And really, thingscould change depending
on who gets elected ona lot of these topics.
James Mintert (06:01):
So I we're just kind of making a case
for the fact that we boththink the November survey,
which will be conducted aweek after the election, is
going to be very interesting.
It certainly was in2016 and in 2020.
We think it'll beinteresting again this time.
So we continue to ask thequestion, looking ahead
to next year, what areyour biggest concerns
for farming operation?
Still, high input costs andlow crop and livestock prices
(06:23):
are the top two concerns.
Um, as the year hasprogressed, people have become
more and more concerned aboutlow crop and livestock prices.
And of course, the focus ismostly on the crop side there.
And on the third component,the third highest risk, Rising
interest rates, that one'sgone the other direction.
Beginning of the year,roughly one out of four
people were worried aboutrising interest rates.
(06:44):
Um, this survey, Ithink it was 15%.
So, fewer people worriedabout interest rates, but
we are still very concernedabout high input costs.
People worried aboutlocking in high break evens.
And then, correspondingly,getting, uh, kind of a
cost price squeeze becauseof relatively low prices.
So those concerns arestill, this part of the
survey was very consistentwith prior surveys.
(07:05):
Some of the other questions,not so much, right?
Michael Langemeier (07:07):
Yeah, as an example of this, I just
talked to someone recentlywho was very concerned about,
uh, you know, cash rents andwas, and was, was telling
me that his break even, hisbreak even for '25 still
looks, it'd be around $5.
You look at futures prices,they're not anywhere
near 5 corn prices.
James Mintert: Yeah, good point. (07:24):
undefined
Just
Michael Langemeier: brings that home. (07:25):
undefined
James Mintert (07:26):
Yeah.
So if there's an index onthe survey that's shocked
me, it was this one, FarmFinancial Performance Index
went up 22 points in Octoberto 90 from 68 in September.
And you know, if you lookedat that index throughout
2024, it's been on adownward trend really since
(07:48):
the beginning of the year.
Uh, not every single month,but if you draw a trend line,
it's, it's downward sloping.
I did not expect tosee this index go up
at all, truthfully.
I especially didn't expectto see it go up 22 points.
Michael Langemeier (08:01):
I admit, I double triple
checked this number becauseI didn't think it could
go up that much either.
I mean, even in early, earlythis year, we were running
80, slightly above 80.
That seems reasonableto, to me, but we hit 90.
We haven't been in, wehaven't been in 90, in about
10 months, I think it wasDecember '23, the last time
we were at 90 or higher.
(08:23):
And '23 certainly was adifferent period than '24.
James Mintert (08:26):
Yeah, so we really don't
have an explanation forwhat happened, right?
People, except for thefact that people are more
optimistic about what'sgoing to take place in
the future than we are.
I mean, that'sthe bottom line.
Michael Langemeier: That has to be it. (08:35):
undefined
James Mintert (08:36):
Um, the Farm Capital Investment
Index, consistent withsome of the other results
we saw this month, was up.
Up 7 points compared toa month ago, 7 points
higher than a year ago.
Um, That index is still inwhat I'm going to call kind
of a broad trading range, abroad sideways trading range
of about 30 on the low endto 50 or so on the high end.
So we're still in the middleof that, so it didn't break
(08:58):
out of the range, but itwas up, suggesting people
thought it was a littlebetter time to invest
than they did a month ago.
Michael Langemeier (09:03):
And this range has been going on for
quite some time, essentiallysince late '21, and you really
can point to when input costsreally skyrocketed in '21,
that's when this, this, thisnumber really came down and it
really hasn't went up since.
James Mintert (09:18):
So it'll be interesting to
see what happens withthat index next month.
Um, we always follow thatquestion up with a question
about people's plans forfarm machinery purchases
in the upcoming yearcompared to a year ago.
And if you look at the resultsfrom June through September,
they made a lot of sense.
Uh, in 50 June, 53% of thepeople in the survey said
they plan to reduce theirfarm machinery purchases in
(09:42):
the, uh, in the upcoming yearcompared to a year earlier.
And that percentage wasclimbing month after
month through September.
By September, it gotup to 69 percent of the
people in the survey.
This month, thatdropped back to 55%.
Again, that's consistentwith other responses we
received in the survey.
The question I had as I lookedat this is, are they really
(10:03):
going to follow through?
Because what happened isin September, 26 percent of
the people said they weregoing to keep their machinery
purchases about the same.
That jumped to 39percent on this survey.
And so, that's kindof where the shift
really occurred, right?
Uh, the people shifted awayfrom saying, I'm going to
lower my machinery purchasesto saying, I'm going to
keep them about the same.
(10:25):
The question is, arethey going to really
follow through on that?
Michael Langemeier: Yeah, they still just (10:27):
undefined
isn't very optimisticfor machinery purchases.
That's the way, that'sthe way I'd state it.
James Mintert (10:33):
So that was the, that was kind of the
easy way out there, Michael.
Michael Langemeier (10:36):
But that's the way I read it.
And it's hard to readwhat about the same means.
Because we don't, we don'task them, you know, how much
they purchased last year.
So that, that one's kindof hard to read what they,
what we really mean by that.
Or what they, what they thinkthey're, they're implying
by answering about the same.
James Mintert (10:51):
Alright, I'm going to let you go on that.
So, the follow up is also,if you think it's a bad time
to make large investments, weask, why do you feel that way?
And there was a shift in theresponses here in October
compared to September.
In September, the topreason for thinking it's
a bad time to make largeinvestments was uncertainty
about farm profitability.
This month, we kind ofreverted back to some
(11:12):
responses we've gottenpreviously, which was the
focus was very heavy on theincrease in prices that's
taken place for farm machineryand new construction.
39 percent of the peoplein the survey said that was
the number one reason for,uh, thinking it's a bad time
to make large investments.
That's very close in termsof responses we've got over
the course of the summer,like in July and in August.
(11:35):
So, What do you make of that?
Michael Langemeier (11:38):
Well, I, I see, I see where
you're coming from onthat increase in prices.
That, that changed, thatchanged quite a bit.
But also, you know,maybe, maybe because it's
a small group, uh, thatthis isn't that important.
But you also look atuncertainty about farm
profitability dropped from31%, uh, as being, uh, as
being a primary reason fornot making large investments
(11:58):
to 23 percent in October.
That's an 8 percent drop.
And so it's consistent withthis increase in sentiment.
James Mintert (12:04):
Yeah.
Again, It was an optim asurprisingly optimistic survey
this month, um, and they wereconsistent across the board.
So we also ask people whothink it's a good time
to make large investmentswhy they feel that way.
So keep in mind, we don'tget a lot of people in the
survey who say it's a goodtime to make investments.
Uh, I think this month it was15 percent of the respondents,
(12:25):
last month I think it was 13%.
So those folks said thatcompared to the beginning
of 2024, more of them werepointing to high dealer
inventories and new technologyand fewer of them were
pointing to strong cash flowsand their farming operation.
And so to me, the, the twointeresting things were
that shift in strong cashflows, January, 32 percent
(12:47):
of the people said strongcash flows are the reason
we want to make investments.
Uh, that was theirtop reason this month
that was down to 19%.
And then the other kindof related point there was
in, uh, January, 7 percentof the people who said
it's a good time to investpointed to they wanted to
invest in new technology.
This month thatdoubled to 14%.
(13:09):
Now keep in mind with a, ifit's only 15 percent of the
people in our survey, itdoesn't take very many people
to go from 7 percent to 14%,so I don't want to hang my
hat too heavily on that.
But it is kind of interestingif you are thinking it's a
good time to invest, maybetechnology is a motivation.
Michael Langemeier (13:25):
I think part of what's going on here
is, is this is the time thatpeople look, uh, for, for
new, uh, new technology.
This is the time of yearwhere they're looking, uh,
to replace that tractor, orreplace that planter, or some
other, uh, piece of equipment.
And so, and so when they'redoing that, they're probably
noticing, hey, there'ssome, there's some new
technology, uh, associatedwith this new tractor
they didn't have before.
(13:45):
And so, I think that might bepart of what's going on there,
at least that's my hunch.
Uh, but going back to yourstrong cash flows, um,
The strong cash flows wasat 19 percent in October.
I don't hate to sound likea broken record, but that
was up from like below10 percent in September.
So, again, more optimism.
James Mintert: Yeah, good point. (14:06):
undefined
Uh, another surprise, theShort Term Farmland Value
Expectation Index jumped.
Uh, it was 25 points higherthan a month earlier.
Um, and that leaves thatindex only 5 points lower than
it was this time last year.
Again, throughout 2024,that index was kind
of drifting lower.
(14:26):
Which made a lotof sense to us.
Um, the jump this month,consistent with what we saw
elsewhere in the survey,but we're really not sure
why people's perspectiveon farmland values all
of a sudden became alot more optimistic.
And that short run questionis about what's going to
happen in the next 12 months.
Michael Langemeier: This question is usually (14:44):
undefined
consistent with the Indexof Current Conditions.
And so when the Indexof Current Conditions
jumped, usually you wouldexpect to jump in this.
They're not perfectlycorrelated, but they're
strongly, stronglycore correlated.
So I think that's part ofwhat's, what's going on here.
Uh, but this, this resultsurprised me how big this jump
was, I mean, we're talking areally large change in this
(15:07):
index from month to month.
It usually doesn'tchange that much.
James Mintert (15:11):
Yeah.
And I, you mentioned thisearlier, but I mean, the
one thing that might'veinfluenced this a little bit
was the fact that we haveheard so many very positive
yield reports this fall.
Yes.
And, uh, That would maybeprovide a little bit
of a boost, I suppose.
When you ask, uh, lookat the raw responses
to that question, it'skind of interesting.
Uh, the percentage ofproducers who expect
(15:32):
farmland values to rise inthe next 12 months jumped
by 15 points while thepercentage expecting lower
values declined 10 points.
And, of course, that explainswhy the index was up so much.
But, um, when you look atthat on the chart, it's
quite striking, right?
So, uh,
The Long Term Farmland ValueExpectation Index was also up.
It was up 12 points.
(15:53):
Um, that's a pretty bigincrease for that index
because that index is askingpeople to look out five years.
And it usuallydoesn't jump around.
To that magnitude.
Michael Langemeier: No, it doesn't. (16:03):
undefined
And this is a 20 pointincrease since August,
it jumped a lot.
Most of that increase forSeptember to October, but
there was also a jump fromfrom August to September.
And so it's a 20 point changefrom August to October.
And like you said that that's,that's quite unusual, because
here we're talking fiveyear, five year land values,
they don't seem to change.
(16:24):
Expectations don'tchange that much for
long term land values.
James Mintert (16:28):
And I think the other interesting thing
about that index is, if you goback and look at the history,
that 159 reading this monthis close to the all time high.
Uh, the all time high inthat index, I think, is
161, so we're within acouple of points of that.
Uh, again, if you askedme before we did the
survey of what I thoughtwas going to happen, I
(16:48):
did not anticipate beingclose to the all time high.
Michael Langemeier (16:52):
I have to admit that the people
that responded to thesurvey this month are seeing
something different thanI'm seeing with respect
to long run land values.
Because I'm not as,I'm not as optimistic.
I'm not particularlyoptimistic.
I'm not pessimistic, butnot, I'm not as optimistic.
James Mintert (17:04):
So we always follow up and say, if you
think values are going to goup in that five year period,
why do you feel that way?
And those responses arekind of interesting.
The percentage of producerspointing to inflation
did rise this month.
So that was, you know,went from, I think, 15
percent in September to21 percent of them said it
was because of inflation.
Um, the other thing that wecontinue to ask about is, you
(17:26):
know, the impact of, of energyproduction on farmland values.
That was consistent, again,it was at 7 percent of
the people pointing toenergy production, so that
includes wind and solar, so.
That wraps up our resultsfor this month's survey.
Uh, the full reportis available on the
Purdue-CME Group Ag EconomyBarometer website, which
is purdue.edu/agbarometer.
(17:47):
And of course, if you'relistening to this by way
of our website, I justwanted to remind you, you
could subscribe to thePurdue Commercial Ag Cast.
It's available on all themajor podcast providers,
as well as being availableon our website, which is
purdue.edu/commercialag.
And so with that, I wantto thank my colleage, Dr.
Michael Langemeier,for joining us today.
And on behalf of theCenter for Commercial
Agriculture, I'm Jim Mintert.
(18:08):
Thanks for joining us.
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