Farmer sentiment improved again in June as the Purdue University-CME Group Ag Economy Barometer increased 14 points to a reading of 117. The barometer’s increase was fueled by improvements in both the Index of Current Conditions, which increased to a reading of 99, 19 percent more than a month earlier, and the Index of Future Expectations, which increased to 126.12 percent more than in May.
The improvement in farmer sentiment left the Ag Economy Barometer at 7 percent less than one year earlier. The Index of Future Expectations was still 10 percent less than its June 2019 level. But the Index of Current Conditions was 2 percent more than in June 2019. That likely reflected considerably improved spring-planting conditions throughout much of the nation, in addition to support from U.S. Department of Agriculture’s Coronavirus Food Assistance Program. The Ag Economy Barometer is calculated each month from 400 U.S. agricultural-producer responses to a telephone survey. This month’s survey was conducted June 22-26, 2020.
Farmer perspective regarding whether or not now is a good time to make large investments in their farming operation improved markedly during the past two months. The Farm Capital Investment Index recovered to a reading of 60 in June, 10 points more than a month earlier and 22 points more than the worst number reached in April. The recovery still left the index 12 points less than the 2020 best number established in February.
For the past four months we’ve also been asking farmers about their plans for farm-machinery purchases in the upcoming year compared to a year ago. Responses to that question suggest producer plans for machinery purchases decreased noticeably during April and May, but recovered to their March level in the June survey. That appears to be consistent with the improvement observed in the investment index.
Farmers were less pessimistic about farm financial performance in June than they were in April and May of that year. But they were noticeably more negative than in early-spring 2019. In June, 42 percent of farmers said they expected farm financial performance to be worse than the previous year. That was a decrease from 55 percent in April and 54 percent in May, but still noticeably worse than in April 2019 when just 27 percent of respondents expected a worse financial performance for their farms than a year earlier. There was virtually no change in the percentage of farmers who expect farm financial performance to improve compared to 2019. Just 12 percent of respondents to the June survey said they expect better financial performance in 2020 compared to 2019.
Although farmers were still concerned about the impact of coronavirus on their farms in June, they were slightly less concerned than a month earlier. When asked about the virus impact on farm profitability, 64 percent of respondents said they were either “very” or “fairly worried.” That was a decrease from 71 percent of respondents who felt that way in May.
In light of ethanol-plant shutdowns and slowdowns in response to poor operating margins, a large majority of farmers at 73 percent still expressed concern about the ethanol industry’s future viability. But that was a decrease somewhat compared to the 81 percent of respondents who expressed concern in May.
The June survey provided the first opportunity to survey farmers after details of the Coronavirus Food Assistance Program were widely available. Sixty percent of farmers in the June survey said the Coronavirus Food Assistance Program “somewhat” at 53 percent or “completely” at 7 percent relieved their concerns about the impact of COVID-19 on their 2020 farm income. About one-fourth of respondents at 26 percent responded “not at all” to that question. But almost two-thirds at 64 percent of June-survey respondents still said they think it will be necessary to approve another bill to provide more economic assistance to farmers in 2020 – similar to May when 67 percent of respondents felt that way.
Farmer short-run outlook for land values improved markedly during the past two months. The percentage of respondents expecting land values to decline during the next 12 months decreased to 21 percent in June, a decrease from 29 percent in May and 35 percent in April. The shift in perspective on farmland values was even more pronounced when farmers were asked for their opinion on farmland values five years into the future. Fifty-five percent of respondents said they expect farmland values to increase during the next five years, an increase from just 40 percent that felt that way in May.
For the second month in a row we asked farmers who rent farmland if they expect to ask their landlords to reduce their 2021 farmland rental rate as a result of COVID-19. In May, 27 percent of respondents said they expected to ask for a rent reduction next year. But in June just 17 percent of farmers responding to the survey said they expect to ask for a rent reduction in 2021.
Concerns about COVID-19 are leading to changes in business practices throughout the U.S. economy. To learn more about how business practices among farmers are changing, we asked farmers about conducting business online and their willingness to attend in-person educational programs. Four out of 10 respondents on the June survey said they have increased the amount of business they conduct online. About half of respondents at 53 percent said they are less likely to attend in-person field days or educational programs during the remainder of the year due to concerns about COVID-19.
For the second month in a row farmer sentiment improved. The Ag Economy Barometer increased 14 points to a reading of 117. Farmers became more optimistic about both the current situation and their expectations for the future. Both the Index of Current Conditions and the Index of Future Expectations increased in June compared to May. Farmers were more inclined to think that now is a good time to make large investments in machinery and buildings than they were in either April or May. Although farmers are still worried about the impact of the coronavirus on farm profitability, they were somewhat less concerned in June than they were in May. Fewer farmers in June than in May said they expect farm financial performance to be worse this year than in 2019. Moreover fewer farmers expect farmland values to weaken in the upcoming year than in May. And when asked to look ahead five years, survey respondents were more likely to expect farmland values to increase than when the same question was posed in May. Four out of 10 farmers said as a result of concerns about COVID-19 they are conducting more business online. More than half of respondents said they are less likely to attend in-person educational events in 2020.
Visit ag.purdue.edu/commercialag/ageconomybarometer for more information.