Farmer sentiment drifts lower on weaker future expectations

Rhea-AI Summary

Farmer sentiment fell in June, as reflected by the Purdue University/CME Group Ag Economy Barometer, which dropped 3 points to 105 compared to May. This was driven by a 5-point decline in the Index of Future Expectations, now at 112, despite a slight increase in the Current Conditions Index to 90. Key factors include high input costs, lower product prices, and rising interest rates. The Farm Capital Investment Index also dropped 3 points to 32. The Short-Term Farmland Value Expectations Index held steady at 115, but the Long-Term Farmland Values Index fell 7 points to 152, influenced by nonfarm investor demand and inflation. Interest in carbon capture and storage projects from ethanol plants was noted, with 8% of respondents approached, mostly with offers under $25 per acre. Moreover, 16% discussed leasing farmland for solar energy, with lease rates increasing, 27% of which exceeded $1,500 per acre.

Positive

• None.

Negative

• Farmer sentiment declined by 3 points to 105.
• Index of Future Expectations dropped 5 points to 112.
• High input costs and rising interest rates are major concerns.
• Farm Capital Investment Index fell by 3 points to 32.
• Long-Term Farmland Values Index decreased by 7 points to 152.

WEST LAFAYETTE, Ind., July 2, 2024 /PRNewswire/ -- Farmer sentiment drifted downward in June as the Purdue University/CME Group Ag Economy Barometer reading of 105 was 3 points lower than a month earlier. The overall decline in sentiment was due to a five-point drop in the Index of Future Expectations, which fell to 112, while the June Current Conditions Index increased to 90, 1 point higher than the May index. High input costs, the risk of lower prices for their products, and rising interest rates continue to weigh on farmer sentiment. This month's Ag Economy Barometer survey was conducted from June 17-21.

"The impact of rising interest rates on their farm operations has become a bigger concern for producers in recent months," said James Mintert, the barometer's principal investigator and director of Purdue University's Center for Commercial Agriculture. "Interest rate risk and high breakeven levels combined with concerns that crop and livestock prices could weaken are holding back producer sentiment and making producers cautious about making large investments."

This month's Farm Capital Investment Index declined by 3 points to a reading of 32, just one point above its historical low. More producers indicated this month that it is not a favorable time for large investments compared to May, while the percentage of producers who viewed it as a good time remained the same.

The Short-Term Farmland Value Expectations Index remained steady at 115 for June. However, there was a notable shift in producers' longer-term outlook on farmland values, with the Long-Term Farmland Values Index dropping to 152, down 7 points from May. Fewer producers expect that farmland values will increase over the next five years, coinciding with a rise in those anticipating values holding steady. Among those expecting a long-term increase in farmland values, 57% attributed their confidence to nonfarm investor demand, while 16% cited inflation as a driving factor. June marked the third consecutive month to include "Energy Production" as a potential driver of farmland values, with 10% of optimistic respondents pointing to energy production as a key driver of farmland values.

This month's survey also explored respondents' interest in carbon capture and storage projects introduced by ethanol plants. Eight percent of respondents reported being approached about such projects, with the majority (93%) noting they received payment offers for less than $25 per acre and only 8% receiving offers exceeding $50 per acre. Additionally, 16% of respondents reported discussions taking place within the last six months about leasing farmland for solar energy production, a slight decline from April and May survey responses. However, lease rates continued an upward trend, with 69% of respondents being offered long-term rates of $1,000 per acre or higher, compared to 27% in June 2021. Notably, 27% of respondents received offers of $1,500 per acre or more, with 58% of leases including an annual escalator clause, typically between 2% and 3% per year.

About the Purdue University Center for Commercial Agriculture
The Center for Commercial Agriculture was founded in 2011 to provide professional development and educational programs for farmers. Housed within Purdue University's Department of Agricultural Economics, the center's faculty and staff develop and execute research and educational programs that address the different needs of managing in today's business environment.

About CME Group
As the world's leading derivatives marketplace, CME Group enables clients to trade futures, options, cash and OTC markets, optimize portfolios, and analyze data — empowering market participants worldwide to efficiently manage risk and capture opportunities. CME Group exchanges offer the widest range of global benchmark products across all major asset classes based on interest rates, equity indexes, foreign exchange, energy, agricultural products and metals. The company offers futures and options on futures trading through the CME Globex platform, fixed income trading via BrokerTec and foreign exchange trading on the EBS platform. In addition, it operates one of the world's leading central counterparty clearing providers, CME Clearing.

CME Group, the Globe logo, CME, Chicago Mercantile Exchange, Globex, and E-mini are trademarks of Chicago Mercantile Exchange Inc. CBOT and Chicago Board of Trade are trademarks of Board of Trade of the City of Chicago, Inc. NYMEX, New York Mercantile Exchange and ClearPort are trademarks of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. BrokerTec is a trademark of BrokerTec Americas LLC and EBS is a trademark of EBS Group LTD. The S&P 500 Index is a product of S&P Dow Jones Indices LLC ("S&P DJI"). "S&P^®", "S&P 500^®", "SPY^®", "SPX^®", US 500 and The 500 are trademarks of Standard & Poor's Financial Services LLC; Dow Jones^®, DJIA^® and Dow Jones Industrial Average are service and/or trademarks of Dow Jones Trademark Holdings LLC. These trademarks have been licensed for use by Chicago Mercantile Exchange Inc. Futures contracts based on the S&P 500 Index are not sponsored, endorsed, marketed, or promoted by S&P DJI, and S&P DJI makes no representation regarding the advisability of investing in such products. All other trademarks are the property of their respective owners.

About Purdue University
Purdue University is a public research institution demonstrating excellence at scale. Ranked among top 10 public universities and with two colleges in the top four in the United States, Purdue discovers and disseminates knowledge with a quality and at a scale second to none. More than 105,000 students study at Purdue across modalities and locations, including nearly 50,000 in person on the West Lafayette campus. Committed to affordability and accessibility, Purdue's main campus has frozen tuition 13 years in a row. See how Purdue never stops in the persistent pursuit of the next giant leap — including its first comprehensive urban campus in Indianapolis, the Mitchell E. Daniels, Jr. School of Business, Purdue Computes and the One Health initiative — at https://www.purdue.edu/president/strategic-initiatives.

Writer: Morgan French, mmfrench@purdue.edu
Source: James Mintert, 765-494-7004, jmintert@purdue.edu

Image URL: https://www.purdue.edu/uns/images/2024/agecon-barometer2406LO.jpg 

Image Caption:
Farmer sentiment drifts lower on weaker future expectations. (Purdue/CME Group Ag Economy Barometer/James Mintert)

CME-G

Purdue University 

View original content:https://www.prnewswire.com/news-releases/farmer-sentiment-drifts-lower-on-weaker-future-expectations-302187762.html

SOURCE CME Group

FAQ

What caused the decline in farmer sentiment in June 2024 according to the Purdue University/CME Group Ag Economy Barometer?

Farmer sentiment declined due to high input costs, the risk of lower product prices, and rising interest rates.

How did the Index of Future Expectations change in June 2024 for CME?

The Index of Future Expectations fell by 5 points to 112 in June 2024.

What was the reading of the Farm Capital Investment Index for June 2024?

The Farm Capital Investment Index declined by 3 points to 32 in June 2024.

How did the Long-Term Farmland Values Index change in June 2024?

The Long-Term Farmland Values Index dropped by 7 points to 152 in June 2024.

What percentage of respondents discussed leasing farmland for solar energy in June 2024?

16% of respondents discussed leasing farmland for solar energy in June 2024.

What were the typical payment offers for carbon capture and storage projects in June 2024?

Most payment offers for carbon capture and storage projects were less than $25 per acre, with only 8% exceeding $50 per acre.