October 1, 2024 • 20 mins
In September, the Purdue University/CME Group Ag Economy Barometer recorded its lowest readings since March 2016. Purdue ag economists James Mintert and Michael Langemeier share some insight into the results of the September 2024 Ag Economy Barometer survey, conducted from Sept. 9-13, 2024. This month, the Ag Economy Barometer fell 12 points to 88, marking significant concerns among producers, especially crop farmers. The discussion highlights shifts in sentiment, the impact of input costs, declining income expectations and profitability, and a detailed look at farmland values and cover crop usage. Understand the current state and future expectations of the U.S. agricultural economy.
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.ag/barometer108.
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/agcast175.
You can find the FULL video episode on our YouTube channel. Visit https://youtu.be/JEONO4VdIuQ 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):
Thanks for joining us for the
Purdue Commercial AgCast.
I'm Jim Mintert, Directorof the Purdue Center for
Commercial Agriculture,and joining me today
is my colleague, Dr.
Michael Langemeier.
We're going to review theresults from the Purdue
University-CME Group AgEconomy Barometer from
the September 2024 survey.
So Michael, the AgEconomy Barometer fell 12
points this month to 88.
(00:27):
That left the index down 18points compared to a year ago.
And to me, the significantpart was that we're below
100, because the base levelfor the barometer, of course,
is the fourth quarter of 2015and the first quarter of 2016.
And so, uh, this month'sreading tells us that
sentiment has dipped belowwhat it was in that late
(00:47):
2015, early 2016 era.
And for listeners that maybeare a little rusty on what
that era was like, that wasthe early stages of a pretty
significant downturn in the U.
S.
farm economy.
And so, that tells meproducers are pretty concerned
about economic conditionson their farms and for
the ag economy right now.
Michael Langemeier (01:05):
Yeah, and I think that's particularly
true for crop producers.
When you look at theresponses in, in terms
of the livestock industryversus the crop industry, uh,
with one of our questions,it's obvious that people
are much more pessimisticabout the crop industry.
Uh, and just to put thisin perspective, if you
look at the '24, uh,perspective or potential
net returns, they're lowerthan what they were in 2016.
(01:26):
So to me, it's not realsurprising that, that the
index is below 100 right now.
James Mintert (01:30):
Yeah, and that's probably a good
point with respect to thedifference between what's
going on in the livestockversus, um, the crop sector.
And, of course, that'sespecially true if you
look at the beef sectorversus the crop sector.
And our survey is weightedtowards crop producers.
In fact, I think, uh, everymonth we, uh, shoot for having
at least 53 percent of theproducers in the survey have
(01:52):
a corn and soybean enterprise.
Most of the time, it'sactually a little bit higher
than that because they mightbe in the survey because
they have another enterprise,but they still have a corn
and soybean enterprise.
And then you add the wheatand cotton farmers onto
that as well, and so it isoriented a little bit towards
the crop producers, and thatis pulling that index down.
If you look at the CurrentCondition Index, it was down 7
(02:12):
points compared to last month.
And that leaves it 22 pointslower than this time last
year, Future ExpectationIndex down 14 points
compared to August, and thatleaves it down 15 points
lower than in September.
And Michael, no big surprisehere but if there was maybe
a little bit of a surprise,maybe it was thinking the
(02:33):
current condition indexmight fall even more.
Michael Langemeier (02:36):
Yeah, and I, I did not expect the
Index of Future Expectationsto drop as much as it did.
And that speaks volumesof what, about what
people think the nextseveral years looks like.
Uh, uh, right, you know,we know that this next year
is not, doesn't look verygood, but in particular
for crop producers.
But, but the fact that thatIndex of Future Expectations
dropped as much as it did, didthe way those course, those
(02:59):
questions are worded, they'relooking out five years.
And so that's pessimisticlong term when you
have that big a drop.
James Mintert (03:06):
You know, and that showed up elsewhere in
the survey, Michael, withrespect to, uh, producer's
attitudes about what'sgoing to take place with
respect to future ag exports.
Which again is afive year question.
Uh, we asked people tolook out five years ahead.
I think we got thelowest positive response
to that question thatwe've ever gotten since
(03:26):
we started asking it, Ithink back in what, 2019?
Michael Langemeier (03:29):
Yeah.
And the lowest index, youput an index for them.
It's the lowest index.
James Mintert (03:33):
Yeah.
So that again.
Historically, exportgrowth has been an engine
of growth for the U.
S.
ag sector, and people arepretty pessimistic about
what's taking place there.
Um, we've been asking thisquestion about what your
biggest concerns are goingback now to the beginning of
2023, and these last severalmonths, we have seen a shift
(03:54):
with more people telling usthat they're worried about
lower crop and livestockprices as a top concern.
This month, it was chosenby one third of the
people in the survey.
That essentially matchedthe percentage who
said higher input cost.
Which since the, sincewe started asking this
question, that's been thenumber one concern all
along, high input cost.
Now we're at a pointwhere lower crop and
(04:15):
livestock prices arejust as big a concern
as, as high input cost.
And you know, Michael, tome, that's just the classic,
where people are worriedabout a cost price squeeze.
Michael Langemeier: Oh, definitely. (04:24):
undefined
And, and, and moreworried about that
than they are policy.
I mean, it's not likethere's not policy concerns.
It's just that these, this,uh, lower crop prices and
higher input costs areoverwhelming, uh, their
concerns about policy.
James Mintert (04:37):
And then if you look at the responses
over the last year, I thinkconsistent with what's
taken place at the FederalReserve, fewer people are
worried about rising interestrates or the concern about
interest rates in general.
A year ago, one fourth of thepeople in the survey said that
was one of their top concerns.
This month, that'sdown to 17%.
And I think that's areflection of the fact that
we still have lingeringhigh rates in the ag
(04:59):
sector compared to wherethey were a few years ago.
But I don't think asmany people are worried
about the potential forrates to go up, right?
Michael Langemeier (05:06):
Yeah, I think that's consistent
with the high input costs.
I mean, if you look at,if you look at agriculture
in input price indices,they're relatively
flat for the last year.
But they're much, muchhigher than what they
were two, three years ago.
And so it's the elevatedprices that are really
concerning and exactlywhat you said is true
for interest rates.
(05:26):
It's not like they'regoing higher, but they're
still relatively highcompared to what they were
a couple of years ago.
James Mintert (05:32):
Yeah.
And I think.
You know, there's been somework on the consumer side and
some other surveys outsideof what we've been doing
that look at what peoplehave as an anchor point.
And I think for a lot ofpeople, the anchor point
is what took place withrespect to all these
things prior to COVID.
Michael Langemeier (05:48):
Yes.
James Mintert (05:49):
That's certainly true on
the consumer side.
There's been severalsurveys that have kind
of documented that.
I think we're lookingat the same thing in
the ag sector as well.
Um, the Farm FinancialPerformance Index came
in at a reading of 68.
That's down four pointscompared to last month.
And it leaves it 18 pointsbelow where it was this time
last year, and that reallytells the story, doesn't it?
Michael Langemeier (06:09):
Yes.
Yes, that definitely tellsthe story that they're
very concerned about this,uh, this margin squeeze.
James Mintert (06:16):
We had a little bit of a time period earlier
this year, in late spring,kind of early summer, when
people didn't seem all thatcognizant of how low prices
were headed and, and theimpact that was going to have
on their financial situation.
I think everybody'sfully aware, fully
engaged at this point.
Again, thinking about thecrop sector, not true in beef,
(06:37):
uh, less true overall in thelivestock sector, but, but
clearly in that crop sector.
Farm Capital InvestmentIndex was up a little bit
this month, up four pointscompared to a month ago, but
that still left the index fourpoints lower than a year ago.
And I think the big picturethere, Michael, is the
index remains in very weakterritory as a large majority
of producers continue toview this as a very poor time
(07:00):
to make large investments.
Michael Langemeier: And that's been true (07:01):
undefined
for over two years now.
And this is an extendedperiod of time here, and
it corresponds with higherinterest rates, uh, but
extended period of timehere where they're just
not very optimistic.
James Mintert (07:13):
Yeah, if you look at the time series, it
is pretty much sideways overexactly the last two years.
Two years ago at thistime, the index was
sitting at a reading of 31.
So we've been in the30s most of the time
over the last two years.
And that contrasts withwhere that index was back
in late 2020 and early 2021.
We had a period of timethere where we were in
the eighties and actuallygot above 90 for a while.
(07:36):
So there was a period whenpeople thought it was a great
time to make investments.
That's certainlynot true today.
And you can see that whenyou look at the underlying
questions, we ask peopleas a followup, what their
plans are for farm machinerypurchases in the upcoming
year and going back to June,you can really see a change
in how people responded.
In June, 53%, a little overhalf of the people in the
(07:58):
survey said they intendedto make fewer purchases
in the upcoming yearthan they did a year ago.
That percentage keepsclimbing month after month,
and this month it was upto almost 70%, I think, 69
percent of the people in thesurvey said fewer machinery
purchases in the upcomingyear than a year ago.
Um, and at the same time,what they were really
(08:19):
doing was flipping from,holding purchases constant
or about the same, tosaying, uh, fewer purchases.
Any surprise foryou on that one?
Michael Langemeier: Not really. (08:29):
undefined
I mean, when you, when youlook at the current, the
current environment, uh, with,with relatively low incomes,
when you have relativelylow incomes, uh, and you've
had that following yearswhere you had really strong
incomes and you probablydid buy some machinery,
uh, this is, you, you'dexpect that the purchases
to be down quite a bit.
James Mintert (08:48):
Yeah.
And from a farm managementperspective, one of the first
things you'd tell a producerwho's looking at the change in
the economic environment, pullback on capital expenditures,
only make expenditureswhen you really need them.
And I think that'sexactly what's going on.
When we ask people aboutwhat the primary reason it's
a bad time to make largeinvestments, again, there's
been a change there overthe last five or so months.
(09:08):
Uh, going back to I thinkMay, 16 percent of the
people in the survey saidit was about uncertainty
about farm profitability.
That's now up to 31 percentand, and actually it's turned
into the number one reason.
Uh, so that's, previouslypeople were pointing
to things like, highcost of farm machinery,
making it a bad time.
(09:29):
They were pointing fora while to the fact that
interest rates had gone up.
Now it's about profitability.
Michael Langemeier (09:34):
And, and one of the things that, I hate
to be overly pessimistic here,but, uh, this, this survey
is pretty pessimistic regard,uh, regarding, uh, uh, large,
large investments and you lookat the top three, uncertainty
about farm profitability, um,uh, you're also looking at
rising, high interest rates.
You're also looking at highprices for farm machinery
and new construction.
(09:54):
Those are your top three.
All three of those are, havesome very strong headwinds and
really, uh, it really drivehome the point that we're not,
probably not going to see.
Uh, very large, uh, uh,investments this year.
James Mintert (10:07):
Yeah, the only one that's really got any hope
of getting better over thenext, uh, say six months or so
Michael Langemeier: is interest rates. (10:11):
undefined
James Mintert: Yeah, yeah, yeah. (10:12):
undefined
And even there, not a hugeamount of help, right?
Um, we do ask people whosay it's a good time to
make large investmentswhy they feel that way.
I think the significant pointhere, Michael, is last month
only 11 percent of the peoplein the survey said it was a
good time to make investments.
This month it was 13%.
So very few peoplethink it's a good time
(10:32):
to make investments.
Um, and, you know, if theydo think it's a good time
to do so, It's the thingthat they're pointing to
is high dealer inventories.
So it is easier to strike adeal right now because of the
availability of machinery inthe, in the high inventory.
Michael Langemeier (10:46):
And one thing that's really
interesting about thisparticular question, if
you go back a year, 32percent said there was a
good time because a strongcash flow to this last.
Uh, month, September,the September 2024 survey
this month, uh, correctmyself there, it's only 8%.
And so, so obviously there,there's a few people out
(11:06):
there, maybe livestockproducers, uh, that, that,
that feel that the cashflow isgoing to be strong enough, uh,
to make large investments, butthat's a, that's a minority.
James Mintert (11:14):
And it's a big shift over the
course of 12 months.
Michael Langemeier: It's a huge shift. (11:16):
undefined
James Mintert (11:16):
Yeah, good, good point.
Uh, the Short Term FarmlandValue Index was down
10 points compared tolast month that left the
index at a reading of 95.
That's the first time thatindex has been, uh, that low
since, I think, July of 2020.
Um, which isreally interesting.
And the fact that it'sbelow 100 is quite striking
(11:37):
because the way the indexis constructed, of course,
it's the percentage ofpeople who say they think
value is going to go up.
Minus the percentage ofpeople who say values
are going to go down.
And so for the first timein a long time, we've got
more people saying theythink values could weaken
than actually go up.
And that's significant to me.
Michael Langemeier (11:58):
Yeah, definitely significant.
And I, I look back whenwe had the last time we
had an index below 100.
And, and according tomy records here, it's
the summer of 2020.
So coming out,coming out of COVID.
Uh, and so it's been a while.
Uh, but I think we're ina new environment, uh,
for, for land prices.
James Mintert (12:16):
And, you know, if you look at the raw
responses to the question,you can really see that.
So, the percentage ofproducers who said they
expect values to risedropped 10 points this month.
And those people essentially,or that percentage group,
uh, essentially shiftedover to no change in values.
Uh, so, when you lookat it on a chart, it's
(12:36):
quite striking, right?
That the, the green barshave really dropped off
the chart pretty hard.
We didn't have any changein the percentage of people
who say that values areheaded lower, but that did
jump up a month ago, right?
So it's sitting at about 19%.
Um, so we're all of a suddenwe're at, we're at the point
where we've got more people,as we said a minute ago.
(12:57):
Who think values could declineover the next 12 months
and think it could go up.
And that's, as youpointed out, we haven't
seen that since 2020.
Michael Langemeier: It's been a while. (13:04):
undefined
James Mintert (13:05):
Yeah.
Uh, the Long TermIndex did the opposite.
It would actually, afterfalling three months in a
row, it did actually risea little bit this month.
It was up, uh, toa reading of 147.
That's about a fivepoint increase compared
to a month ago.
But that still leaves thatindex six points below where
it was this time last year.
And of course, it's adifferent perspective.
(13:26):
It's, that's lookingout five years.
And, you know, if you lookat that index over time,
it has a tendency to justkind of want to go sideways.
It does fluctuate, butit doesn't correlate
that strongly with the12 month index, does it?
Michael Langemeier (13:40):
It doesn't correlate with, any of the
indices that strongly and,and I think what's going on
here, and we've, we've talkedabout this before, but if you
look at any five year averageof land values going back
quite a while, in, in mostcases, well over 90 percent
of the time, uh, the valuesactually go up during a five
year period, and that's whatthis, this, uh, this, this,
(14:02):
uh, index is reflecting.
James Mintert (14:04):
Yeah.
That's probably a good point.
Um, we do ask the folkswho think farmland values
are going to rise overthe next five years
why they feel that way.
And probably the mostinteresting thing there, not
a lot of change here, butif you look at the values
the last few months, andwe started asking there,
including this as a responseback in, I think, April, the
(14:24):
percentage of people who arepointing to energy production,
meaning solar and wind energy,as a reason why they're
optimistic about farmlandvalues is holding steady at
about six to seven percent.
We had, I think we had acouple of months when it
was above ten percent, uh,but most of the time in
the last three months it'sbeen six to seven percent.
(14:44):
That's not going away.
Michael Langemeier (14:46):
It's not going away, and one
of the interesting thingsabout that, that's higher
than the percentage that,uh, the percentage of people
that are listing strong,uh, farm cash flows or,
uh, low interest rates.
And just put in perspective,two, two key fundamentals.
Uh, there's a very smallpercent, uh, that, that
think they're going upbecause of that reason.
There's a higher percentthink they're going
(15:07):
up because of energy.
And I want to just kind ofputs that in perspective
that this, this energyproduction, it's, it hasn't
as a, it's having a prettylarge impact on farmland
values in some areas.
James Mintert (15:17):
Yeah, and I think that's a good point
to maybe reiterate that thisis a national survey, right?
This is not focusedon a single state.
It's not focused on theCorn Belt exclusively.
It is a national survey, soit suggests it's a fairly
broad based, um, uh, factorwith respect to land values.
Admittedly, not in everycounty across the nation,
(15:38):
but enough, widespreadenough that we're seeing
some impacts show up there.
Um, each year in September,going back to 2021, uh, we've
been asking people abouttheir usage of cover crops.
I guess the first time weasked this, we did it maybe
in August of 21, but so forfour years in a row now,
we've been asking a seriesof questions about cover
(15:59):
crop usage just to kind oftrack what's going on there.
And, you know, a couple ofthe questions are really
kind of interesting.
Some of the responsesare pretty much the same,
so no, no big shift fromone year to the next.
Um, but, You know, if you lookat the percentage of people
who say they are currentlyusing cover crops, uh, that's
pretty consistently in oursurvey been over 50 percent.
(16:20):
This month I thinkit was 56 percent.
A year ago it was 52 percent.
That's probably not enoughdifference to really worry too
about it, much about that froma statistical perspective.
So that's, that'skind of interesting.
I think the first time wesaw that, Michael, I was
a little surprised at howhigh that percentage was.
Michael Langemeier (16:36):
Yeah, I was too, and there's only 25
percent, uh, that do not use.
I mean, that have neverused, and so that, that,
that was smaller thanI thought it would be.
Uh, and then there's another,uh, 20 percent or so, I
think, I think it's exactly20 percent that have used in
the past and discontinued.
James Mintert (16:53):
Yeah.
So the other interestingthing about this is we've
been asking a questionthat says annually, what
proportion of your farm didyou plant to cover crops?
Uh, and this is going,I think, Michael, to the
people who said, yes, Icurrently plant cover crops.
And there has beena shift there.
In the early years, thefirst couple times we asked
(17:15):
this, we got between 54,59 percent, I think in 2022
it dropped to 50 percent,said they were only planting
cover crops on 25 percentor less of their acreage.
But these last couple years,the percentage of producers
who say they're doing iton a small piece of their
acreage has been declining.
(17:35):
And the percentage whosay they're devoting a
higher proportion of theirtotal acreage to cover
crops has been rising.
And, and to maybe put thatin perspective, um, I think
if you, if you aggregatethe people in the 26 percent
of the acreage up to 100percent of the acreage, the
first couple times we askedthis, that was about 40,
(17:57):
One to maybe 46 percent ofthe people in the survey
this time around, thatwas up to 68 percent of
the people, the survey whosaid they use cover crops.
So to me, the message, atleast based on our survey, is
that, uh, among people who usecover crops, they're devoting
a larger and larger proportionof their total farm acreage.
(18:18):
to cover crops.
Do you, do you agreewith that assessment?
Michael Langemeier (18:20):
Yes.
And, and, and, and a lotof these have been doing
this for quite some time.
They've been doing, they'vebeen planting cover crops
for quite some time.
And so obviously, uh, someof these people that have
been doing this for quitesome time, it's working.
Uh, and, and when something'sworking like the technology
is working like that,you're gonna, you're gonna
put it on more acres.
You're gonna usethat on more acres.
James Mintert (18:39):
Yeah.
So there's, there's a groupof people out there who've
been pretty successful, uh,using cover crops to the
point where they think it'sworthwhile enough to actually
over time devote more andmore of their acreage to
the usage of cover crops.
Um, you know, when you look atmotivations for planting cover
crops, those don't seem likethey've changed very much.
People point to soil healthand improving erosion control.
(19:01):
Those are the top two.
Water quality showsup as number three.
Um, if there is a surpriseout there, Not that many
people tell us it's relatedto carbon sequestration.
I think the first coupletimes we asked this question,
10 to 11 percent of thepeople said it was carbon
sequestration was a motivationfor using cover crops.
This month, it wasonly 7 percent.
(19:23):
So I was, if there's asurprise, I would have
expected that numberto maybe drift upward.
Michael Langemeier: And I think it might. (19:27):
undefined
I mean, it seems to melike there's some policy
legislation that's,that's, that's, that's
gonna, that we're gonnasee here relatively soon
that may encourage Uh,more carbon sequestration.
So we'll see, we're going tokeep asking that question.
James Mintert (19:40):
Yeah.
So it'd be interesting to seehow that tracks over time, but
at least so far, we haven'tseen too much take place there
with respect to a bump up.
So that wraps upthe highlights for
this month's survey.
You can get the fullreport available on
the Purdue-CME Group AgEconomy Barometer website.
That's purdue.
edu/agbarometer.
We also have a set of slidesto go along with this podcast.
(20:01):
If you want to look atsome of the charts that
Michael and I were lookingwhile we were discussing
this month's results andyou can download those
from our website as well.
With that, I want to thankMichael for joining me today
and thank you for listeningand viewing this podcast.
On behalf of the Centerfor Commercial Agriculture,
I'm Jim Mintert.
Thanks for joining us for the
Purdue Commercial AgCast.
I'm Jim Mintert, Directorof the Purdue Center for
Commercial Agriculture,and joining me today
is my colleague, Dr.
Michael Langemeier.
We're going to review theresults from the Purdue
University-CME Group AgEconomy Barometer from
the September 2024 survey.
So Michael, the AgEconomy Barometer fell 12
points this month to 88.
(00:27):
That left the index down 18points compared to a year ago.
And to me, the significantpart was that we're below
100, because the base levelfor the barometer, of course,
is the fourth quarter of 2015and the first quarter of 2016.
And so, uh, this month'sreading tells us that
sentiment has dipped belowwhat it was in that late
(00:47):
2015, early 2016 era.
And for listeners that maybeare a little rusty on what
that era was like, that wasthe early stages of a pretty
significant downturn in the U.
S.
farm economy.
And so, that tells meproducers are pretty concerned
about economic conditionson their farms and for
the ag economy right now.
Michael Langemeier (01:05):
Yeah, and I think that's particularly
true for crop producers.
When you look at theresponses in, in terms
of the livestock industryversus the crop industry, uh,
with one of our questions,it's obvious that people
are much more pessimisticabout the crop industry.
Uh, and just to put thisin perspective, if you
look at the '24, uh,perspective or potential
net returns, they're lowerthan what they were in 2016.
(01:26):
So to me, it's not realsurprising that, that the
index is below 100 right now.
James Mintert (01:30):
Yeah, and that's probably a good
point with respect to thedifference between what's
going on in the livestockversus, um, the crop sector.
And, of course, that'sespecially true if you
look at the beef sectorversus the crop sector.
And our survey is weightedtowards crop producers.
In fact, I think, uh, everymonth we, uh, shoot for having
at least 53 percent of theproducers in the survey have
(01:52):
a corn and soybean enterprise.
Most of the time, it'sactually a little bit higher
than that because they mightbe in the survey because
they have another enterprise,but they still have a corn
and soybean enterprise.
And then you add the wheatand cotton farmers onto
that as well, and so it isoriented a little bit towards
the crop producers, and thatis pulling that index down.
If you look at the CurrentCondition Index, it was down 7
(02:12):
points compared to last month.
And that leaves it 22 pointslower than this time last
year, Future ExpectationIndex down 14 points
compared to August, and thatleaves it down 15 points
lower than in September.
And Michael, no big surprisehere but if there was maybe
a little bit of a surprise,maybe it was thinking the
(02:33):
current condition indexmight fall even more.
Michael Langemeier (02:36):
Yeah, and I, I did not expect the
Index of Future Expectationsto drop as much as it did.
And that speaks volumesof what, about what
people think the nextseveral years looks like.
Uh, uh, right, you know,we know that this next year
is not, doesn't look verygood, but in particular
for crop producers.
But, but the fact that thatIndex of Future Expectations
dropped as much as it did, didthe way those course, those
(02:59):
questions are worded, they'relooking out five years.
And so that's pessimisticlong term when you
have that big a drop.
James Mintert (03:06):
You know, and that showed up elsewhere in
the survey, Michael, withrespect to, uh, producer's
attitudes about what'sgoing to take place with
respect to future ag exports.
Which again is afive year question.
Uh, we asked people tolook out five years ahead.
I think we got thelowest positive response
to that question thatwe've ever gotten since
(03:26):
we started asking it, Ithink back in what, 2019?
Michael Langemeier (03:29):
Yeah.
And the lowest index, youput an index for them.
It's the lowest index.
James Mintert (03:33):
Yeah.
So that again.
Historically, exportgrowth has been an engine
of growth for the U.
S.
ag sector, and people arepretty pessimistic about
what's taking place there.
Um, we've been asking thisquestion about what your
biggest concerns are goingback now to the beginning of
2023, and these last severalmonths, we have seen a shift
(03:54):
with more people telling usthat they're worried about
lower crop and livestockprices as a top concern.
This month, it was chosenby one third of the
people in the survey.
That essentially matchedthe percentage who
said higher input cost.
Which since the, sincewe started asking this
question, that's been thenumber one concern all
along, high input cost.
Now we're at a pointwhere lower crop and
(04:15):
livestock prices arejust as big a concern
as, as high input cost.
And you know, Michael, tome, that's just the classic,
where people are worriedabout a cost price squeeze.
Michael Langemeier: Oh, definitely. (04:24):
undefined
And, and, and moreworried about that
than they are policy.
I mean, it's not likethere's not policy concerns.
It's just that these, this,uh, lower crop prices and
higher input costs areoverwhelming, uh, their
concerns about policy.
James Mintert (04:37):
And then if you look at the responses
over the last year, I thinkconsistent with what's
taken place at the FederalReserve, fewer people are
worried about rising interestrates or the concern about
interest rates in general.
A year ago, one fourth of thepeople in the survey said that
was one of their top concerns.
This month, that'sdown to 17%.
And I think that's areflection of the fact that
we still have lingeringhigh rates in the ag
(04:59):
sector compared to wherethey were a few years ago.
But I don't think asmany people are worried
about the potential forrates to go up, right?
Michael Langemeier (05:06):
Yeah, I think that's consistent
with the high input costs.
I mean, if you look at,if you look at agriculture
in input price indices,they're relatively
flat for the last year.
But they're much, muchhigher than what they
were two, three years ago.
And so it's the elevatedprices that are really
concerning and exactlywhat you said is true
for interest rates.
(05:26):
It's not like they'regoing higher, but they're
still relatively highcompared to what they were
a couple of years ago.
James Mintert (05:32):
Yeah.
And I think.
You know, there's been somework on the consumer side and
some other surveys outsideof what we've been doing
that look at what peoplehave as an anchor point.
And I think for a lot ofpeople, the anchor point
is what took place withrespect to all these
things prior to COVID.
Michael Langemeier (05:48):
Yes.
James Mintert (05:49):
That's certainly true on
the consumer side.
There's been severalsurveys that have kind
of documented that.
I think we're lookingat the same thing in
the ag sector as well.
Um, the Farm FinancialPerformance Index came
in at a reading of 68.
That's down four pointscompared to last month.
And it leaves it 18 pointsbelow where it was this time
last year, and that reallytells the story, doesn't it?
Michael Langemeier (06:09):
Yes.
Yes, that definitely tellsthe story that they're
very concerned about this,uh, this margin squeeze.
James Mintert (06:16):
We had a little bit of a time period earlier
this year, in late spring,kind of early summer, when
people didn't seem all thatcognizant of how low prices
were headed and, and theimpact that was going to have
on their financial situation.
I think everybody'sfully aware, fully
engaged at this point.
Again, thinking about thecrop sector, not true in beef,
(06:37):
uh, less true overall in thelivestock sector, but, but
clearly in that crop sector.
Farm Capital InvestmentIndex was up a little bit
this month, up four pointscompared to a month ago, but
that still left the index fourpoints lower than a year ago.
And I think the big picturethere, Michael, is the
index remains in very weakterritory as a large majority
of producers continue toview this as a very poor time
(07:00):
to make large investments.
Michael Langemeier: And that's been true (07:01):
undefined
for over two years now.
And this is an extendedperiod of time here, and
it corresponds with higherinterest rates, uh, but
extended period of timehere where they're just
not very optimistic.
James Mintert (07:13):
Yeah, if you look at the time series, it
is pretty much sideways overexactly the last two years.
Two years ago at thistime, the index was
sitting at a reading of 31.
So we've been in the30s most of the time
over the last two years.
And that contrasts withwhere that index was back
in late 2020 and early 2021.
We had a period of timethere where we were in
the eighties and actuallygot above 90 for a while.
(07:36):
So there was a period whenpeople thought it was a great
time to make investments.
That's certainlynot true today.
And you can see that whenyou look at the underlying
questions, we ask peopleas a followup, what their
plans are for farm machinerypurchases in the upcoming
year and going back to June,you can really see a change
in how people responded.
In June, 53%, a little overhalf of the people in the
(07:58):
survey said they intendedto make fewer purchases
in the upcoming yearthan they did a year ago.
That percentage keepsclimbing month after month,
and this month it was upto almost 70%, I think, 69
percent of the people in thesurvey said fewer machinery
purchases in the upcomingyear than a year ago.
Um, and at the same time,what they were really
(08:19):
doing was flipping from,holding purchases constant
or about the same, tosaying, uh, fewer purchases.
Any surprise foryou on that one?
Michael Langemeier: Not really. (08:29):
undefined
I mean, when you, when youlook at the current, the
current environment, uh, with,with relatively low incomes,
when you have relativelylow incomes, uh, and you've
had that following yearswhere you had really strong
incomes and you probablydid buy some machinery,
uh, this is, you, you'dexpect that the purchases
to be down quite a bit.
James Mintert (08:48):
Yeah.
And from a farm managementperspective, one of the first
things you'd tell a producerwho's looking at the change in
the economic environment, pullback on capital expenditures,
only make expenditureswhen you really need them.
And I think that'sexactly what's going on.
When we ask people aboutwhat the primary reason it's
a bad time to make largeinvestments, again, there's
been a change there overthe last five or so months.
(09:08):
Uh, going back to I thinkMay, 16 percent of the
people in the survey saidit was about uncertainty
about farm profitability.
That's now up to 31 percentand, and actually it's turned
into the number one reason.
Uh, so that's, previouslypeople were pointing
to things like, highcost of farm machinery,
making it a bad time.
(09:29):
They were pointing fora while to the fact that
interest rates had gone up.
Now it's about profitability.
Michael Langemeier (09:34):
And, and one of the things that, I hate
to be overly pessimistic here,but, uh, this, this survey
is pretty pessimistic regard,uh, regarding, uh, uh, large,
large investments and you lookat the top three, uncertainty
about farm profitability, um,uh, you're also looking at
rising, high interest rates.
You're also looking at highprices for farm machinery
and new construction.
(09:54):
Those are your top three.
All three of those are, havesome very strong headwinds and
really, uh, it really drivehome the point that we're not,
probably not going to see.
Uh, very large, uh, uh,investments this year.
James Mintert (10:07):
Yeah, the only one that's really got any hope
of getting better over thenext, uh, say six months or so
Michael Langemeier: is interest rates. (10:11):
undefined
James Mintert: Yeah, yeah, yeah. (10:12):
undefined
And even there, not a hugeamount of help, right?
Um, we do ask people whosay it's a good time to
make large investmentswhy they feel that way.
I think the significant pointhere, Michael, is last month
only 11 percent of the peoplein the survey said it was a
good time to make investments.
This month it was 13%.
So very few peoplethink it's a good time
(10:32):
to make investments.
Um, and, you know, if theydo think it's a good time
to do so, It's the thingthat they're pointing to
is high dealer inventories.
So it is easier to strike adeal right now because of the
availability of machinery inthe, in the high inventory.
Michael Langemeier (10:46):
And one thing that's really
interesting about thisparticular question, if
you go back a year, 32percent said there was a
good time because a strongcash flow to this last.
Uh, month, September,the September 2024 survey
this month, uh, correctmyself there, it's only 8%.
And so, so obviously there,there's a few people out
(11:06):
there, maybe livestockproducers, uh, that, that,
that feel that the cashflow isgoing to be strong enough, uh,
to make large investments, butthat's a, that's a minority.
James Mintert (11:14):
And it's a big shift over the
course of 12 months.
Michael Langemeier: It's a huge shift. (11:16):
undefined
James Mintert (11:16):
Yeah, good, good point.
Uh, the Short Term FarmlandValue Index was down
10 points compared tolast month that left the
index at a reading of 95.
That's the first time thatindex has been, uh, that low
since, I think, July of 2020.
Um, which isreally interesting.
And the fact that it'sbelow 100 is quite striking
(11:37):
because the way the indexis constructed, of course,
it's the percentage ofpeople who say they think
value is going to go up.
Minus the percentage ofpeople who say values
are going to go down.
And so for the first timein a long time, we've got
more people saying theythink values could weaken
than actually go up.
And that's significant to me.
Michael Langemeier (11:58):
Yeah, definitely significant.
And I, I look back whenwe had the last time we
had an index below 100.
And, and according tomy records here, it's
the summer of 2020.
So coming out,coming out of COVID.
Uh, and so it's been a while.
Uh, but I think we're ina new environment, uh,
for, for land prices.
James Mintert (12:16):
And, you know, if you look at the raw
responses to the question,you can really see that.
So, the percentage ofproducers who said they
expect values to risedropped 10 points this month.
And those people essentially,or that percentage group,
uh, essentially shiftedover to no change in values.
Uh, so, when you lookat it on a chart, it's
(12:36):
quite striking, right?
That the, the green barshave really dropped off
the chart pretty hard.
We didn't have any changein the percentage of people
who say that values areheaded lower, but that did
jump up a month ago, right?
So it's sitting at about 19%.
Um, so we're all of a suddenwe're at, we're at the point
where we've got more people,as we said a minute ago.
(12:57):
Who think values could declineover the next 12 months
and think it could go up.
And that's, as youpointed out, we haven't
seen that since 2020.
Michael Langemeier: It's been a while. (13:04):
undefined
James Mintert (13:05):
Yeah.
Uh, the Long TermIndex did the opposite.
It would actually, afterfalling three months in a
row, it did actually risea little bit this month.
It was up, uh, toa reading of 147.
That's about a fivepoint increase compared
to a month ago.
But that still leaves thatindex six points below where
it was this time last year.
And of course, it's adifferent perspective.
(13:26):
It's, that's lookingout five years.
And, you know, if you lookat that index over time,
it has a tendency to justkind of want to go sideways.
It does fluctuate, butit doesn't correlate
that strongly with the12 month index, does it?
Michael Langemeier (13:40):
It doesn't correlate with, any of the
indices that strongly and,and I think what's going on
here, and we've, we've talkedabout this before, but if you
look at any five year averageof land values going back
quite a while, in, in mostcases, well over 90 percent
of the time, uh, the valuesactually go up during a five
year period, and that's whatthis, this, uh, this, this,
(14:02):
uh, index is reflecting.
James Mintert (14:04):
Yeah.
That's probably a good point.
Um, we do ask the folkswho think farmland values
are going to rise overthe next five years
why they feel that way.
And probably the mostinteresting thing there, not
a lot of change here, butif you look at the values
the last few months, andwe started asking there,
including this as a responseback in, I think, April, the
(14:24):
percentage of people who arepointing to energy production,
meaning solar and wind energy,as a reason why they're
optimistic about farmlandvalues is holding steady at
about six to seven percent.
We had, I think we had acouple of months when it
was above ten percent, uh,but most of the time in
the last three months it'sbeen six to seven percent.
(14:44):
That's not going away.
Michael Langemeier (14:46):
It's not going away, and one
of the interesting thingsabout that, that's higher
than the percentage that,uh, the percentage of people
that are listing strong,uh, farm cash flows or,
uh, low interest rates.
And just put in perspective,two, two key fundamentals.
Uh, there's a very smallpercent, uh, that, that
think they're going upbecause of that reason.
There's a higher percentthink they're going
(15:07):
up because of energy.
And I want to just kind ofputs that in perspective
that this, this energyproduction, it's, it hasn't
as a, it's having a prettylarge impact on farmland
values in some areas.
James Mintert (15:17):
Yeah, and I think that's a good point
to maybe reiterate that thisis a national survey, right?
This is not focusedon a single state.
It's not focused on theCorn Belt exclusively.
It is a national survey, soit suggests it's a fairly
broad based, um, uh, factorwith respect to land values.
Admittedly, not in everycounty across the nation,
(15:38):
but enough, widespreadenough that we're seeing
some impacts show up there.
Um, each year in September,going back to 2021, uh, we've
been asking people abouttheir usage of cover crops.
I guess the first time weasked this, we did it maybe
in August of 21, but so forfour years in a row now,
we've been asking a seriesof questions about cover
(15:59):
crop usage just to kind oftrack what's going on there.
And, you know, a couple ofthe questions are really
kind of interesting.
Some of the responsesare pretty much the same,
so no, no big shift fromone year to the next.
Um, but, You know, if you lookat the percentage of people
who say they are currentlyusing cover crops, uh, that's
pretty consistently in oursurvey been over 50 percent.
(16:20):
This month I thinkit was 56 percent.
A year ago it was 52 percent.
That's probably not enoughdifference to really worry too
about it, much about that froma statistical perspective.
So that's, that'skind of interesting.
I think the first time wesaw that, Michael, I was
a little surprised at howhigh that percentage was.
Michael Langemeier (16:36):
Yeah, I was too, and there's only 25
percent, uh, that do not use.
I mean, that have neverused, and so that, that,
that was smaller thanI thought it would be.
Uh, and then there's another,uh, 20 percent or so, I
think, I think it's exactly20 percent that have used in
the past and discontinued.
James Mintert (16:53):
Yeah.
So the other interestingthing about this is we've
been asking a questionthat says annually, what
proportion of your farm didyou plant to cover crops?
Uh, and this is going,I think, Michael, to the
people who said, yes, Icurrently plant cover crops.
And there has beena shift there.
In the early years, thefirst couple times we asked
(17:15):
this, we got between 54,59 percent, I think in 2022
it dropped to 50 percent,said they were only planting
cover crops on 25 percentor less of their acreage.
But these last couple years,the percentage of producers
who say they're doing iton a small piece of their
acreage has been declining.
(17:35):
And the percentage whosay they're devoting a
higher proportion of theirtotal acreage to cover
crops has been rising.
And, and to maybe put thatin perspective, um, I think
if you, if you aggregatethe people in the 26 percent
of the acreage up to 100percent of the acreage, the
first couple times we askedthis, that was about 40,
(17:57):
One to maybe 46 percent ofthe people in the survey
this time around, thatwas up to 68 percent of
the people, the survey whosaid they use cover crops.
So to me, the message, atleast based on our survey, is
that, uh, among people who usecover crops, they're devoting
a larger and larger proportionof their total farm acreage.
(18:18):
to cover crops.
Do you, do you agreewith that assessment?
Michael Langemeier (18:20):
Yes.
And, and, and, and a lotof these have been doing
this for quite some time.
They've been doing, they'vebeen planting cover crops
for quite some time.
And so obviously, uh, someof these people that have
been doing this for quitesome time, it's working.
Uh, and, and when something'sworking like the technology
is working like that,you're gonna, you're gonna
put it on more acres.
You're gonna usethat on more acres.
James Mintert (18:39):
Yeah.
So there's, there's a groupof people out there who've
been pretty successful, uh,using cover crops to the
point where they think it'sworthwhile enough to actually
over time devote more andmore of their acreage to
the usage of cover crops.
Um, you know, when you look atmotivations for planting cover
crops, those don't seem likethey've changed very much.
People point to soil healthand improving erosion control.
(19:01):
Those are the top two.
Water quality showsup as number three.
Um, if there is a surpriseout there, Not that many
people tell us it's relatedto carbon sequestration.
I think the first coupletimes we asked this question,
10 to 11 percent of thepeople said it was carbon
sequestration was a motivationfor using cover crops.
This month, it wasonly 7 percent.
(19:23):
So I was, if there's asurprise, I would have
expected that numberto maybe drift upward.
Michael Langemeier: And I think it might. (19:27):
undefined
I mean, it seems to melike there's some policy
legislation that's,that's, that's, that's
gonna, that we're gonnasee here relatively soon
that may encourage Uh,more carbon sequestration.
So we'll see, we're going tokeep asking that question.
James Mintert (19:40):
Yeah.
So it'd be interesting to seehow that tracks over time, but
at least so far, we haven'tseen too much take place there
with respect to a bump up.
So that wraps upthe highlights for
this month's survey.
You can get the fullreport available on
the Purdue-CME Group AgEconomy Barometer website.
That's purdue.
edu/agbarometer.
We also have a set of slidesto go along with this podcast.
(20:01):
If you want to look atsome of the charts that
Michael and I were lookingwhile we were discussing
this month's results andyou can download those
from our website as well.
With that, I want to thankMichael for joining me today
and thank you for listeningand viewing this podcast.
On behalf of the Centerfor Commercial Agriculture,
I'm Jim Mintert.
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