The April reading of the Ag Economy Barometer was 178, virtually unchanged from a month earlier when the index stood at 177. It’s just 5 points less than its all-time best of 183, which was set back in October.
But compared to March there was a small change in producer perspective regarding the agricultural economy. Producers became more optimistic about the future while their appraisal of the current situation waned. In April the Index of Future Expectations increased 5 points to 169, whereas the Index of Current Conditions decreased 7 points to 195. Both of the barometer’s sub-indices remain historically strong, with the Index of Current Conditions just 3 percent less than its all-time best. The Index of Future Expectations reached its second-best reading since the survey’s inception in fall 2015.
The Ag Economy Barometer sentiment index is calculated each month from 400 U.S. agricultural-producer responses to a telephone survey. This month’s survey was conducted April 19-23, 2021.
Farmer expectations for a farm’s financial performance continues to improve. The Farm Financial Performance Index increased to a record reading of 138 in April, an increase of 13 points from a month earlier and 83 points more than in April 2020. Strength in the financial-performance index this month was primarily driven by more producers saying they expect better financial performance this year compared to 2020 – an increase from 39 percent who felt that way in March to 50 percent in April. Strength in commodity prices continues to drive improving expectations for strong financial performance, even though many input costs are increasing.
Somewhat surprisingly, given expectations for strong financial performance, the Farm Capital Investment Index declined 13 points in April compared to March – leaving the index at 75. This month’s decline leaves the index just slightly ahead of where it was before the pandemic began in winter 2020, when it stood at 72. The investment index is based upon a question that asks producers if now is a good time or a bad time to make large investments in things like buildings and equipment.
But when asked more specifically about their plans concerning farm-machinery purchases, farmer optimism was still evident. Compared to March, more producers this month said they plan to increase their machinery purchases. Fewer farmers said they plan to hold their future purchases unchanged from a year earlier. The difference in responses to those two investment questions could be reflective of both the increase in costs and the difficulty in scheduling construction projects across the United States.
Farmers expect the increase in farmland values to continue unabated during the next year; the Short-Run Farmland Value Expectations Index rose to a record reading of 159 – 11 points more than a month earlier. This month’s reading stands in sharp contrast to a year ago when the short-run index bottomed out at a reading of 72.
But producers were less optimistic when queried about their longer-run or five-year outlook for farmland values. The Long-Term Farmland Values Expectations Index declined 9 points in April to a reading of 148. The difference in producer short- and long-term expectations could be an indication they are concerned that the rapid increase in farmland values currently underway might not be sustainable through the long run.
Myriad tax-policy proposals are currently under consideration by the Biden administration and Congress. To learn more about ag-producer perspective on tax policy, this month’s survey included several questions focused on taxation. Almost 9 out of 10 or 87 percent of the survey respondents said they expect capital-gains rates to increase during the next five years. Three-fourths of producers in this month’s survey said they are “very concerned” about the possible elimination of the step-up in cost basis for farmland in inherited estates. About two-thirds or 68 percent of respondents said they are “very concerned” about a possible reduction in the estate-tax exemption for inherited estates.
Perhaps the biggest issue facing farm families is their ability to pass their farm business on to the next generation. When asked if they are concerned that changes in tax policy being considered by Congress will make it more difficult to pass their farm on to the next generation of farmers in their family, 82 percent of producers said they are “very concerned.” An additional 13 percent of respondents said they are “somewhat concerned,” suggesting the issue is on the minds of almost all ag producers.
Now that COVID vaccinations are widely available across the United States, attention is shifting to the percentage of the U.S. population that doesn’t plan to be vaccinated. Results from a mid-February-2021 survey conducted by the Pew Research Center indicated that 30 percent of U.S. adults either “probably” or “definitely” would not get the COVID vaccine. A series of polls from Monmouth University conducted in January, March and April 2021 indicate 21 percent to 24 percent of U.S. adults will “likely never get the vaccine.”
To learn more about commercial-ag-producer vaccination plans and to compare them to the U.S. population at large, we’ve been asking about producer vaccination plans going back to October 2020. The percentage of producers planning to be vaccinated as soon as possible increased from just 24 percent this past October to 58 percent in January. It’s been fluctuating between 54 percent and 60 percent since that time. The percentage of commercial ag producers saying no they don’t plan to be vaccinated declined from 37 percent in October to 28 percent in January. Since January the percentage of agricultural producers saying they don’t plan to be vaccinated has ranged from 28 percent to 32 percent. Those results suggest the reluctance to be vaccinated for COVID among U.S. ag producers mirrors that of the larger population of all U.S. adults.
Following an almost-one-year hiatus, more in-person ag field days, workshops and educational events are being planned for 2021. On both the March and April barometer surveys, we asked producers if they are more or less likely to attend those programs than they were in 2020. Responses were mixed. Two-thirds to about 70 percent of respondents said they are more likely to attend in-person events this year. But 28 percent to 35 percent of producers said they’re less likely to attend in-person events. For program planners that implies there’s still a need to offer programs in a hybrid or virtual format to reach the broad audience of commercial ag producers.
The Ag Economy Barometer was virtually unchanged in April compared to March, but producers indicated more optimism about the future and a bit less optimism about current conditions than a month earlier. Ag producers continue to report expectations for very strong financial performance on the part of their farms, and expect farmland values to continue to increase during the next year. But producers were a bit less optimistic about the long-term outlook for farmland values, suggesting there might be some concern that recent farmland price increases might not be sustainable.
Despite expectations for strong financial performance, farmers were less inclined to think now is a good time for large investments in buildings and equipment than they were in March. But when queried more specifically about farm-machinery investment plans, more producers in April said they planned to increase their farm-machinery purchases than in March. Possible changes in U.S. tax policy are on the minds of ag producers. Ninety-five percent of survey respondents are either somewhat or very concerned that changes in tax policy being considered will make it more difficult to pass their farms on to the next generation.