US ag financial system barometer posts sharp declines in Might
10 June 2021
The Ag Financial system Barometer fell by 20 factors in Might as producers stay bullish on farmland values.
The Purdue University/CME Group Ag Economy Barometer noticed a major decline in Might, down 20 factors to a studying of 158. This marks the bottom studying for the survey since September of 2020.
Producers had been much less optimistic about each present situations and the way forward for the agricultural financial system. The Index of Present Situations dropped 17 factors to a studying of 178 and the Index of Future Expectations fell 20 factors to a studying of 149. The Ag Financial system Barometer is calculated every month from 400 US agricultural producers’ responses to a phone survey. This month’s survey was carried out from 10 to 14 Might 2021.
“The potential for altering tax guidelines and rising enter prices seemed to be on producers minds this month and had been the first drivers for the Ag Barometer’s decline,” stated James Mintert, the barometer’s principal investigator and director of Purdue College’s Middle for Industrial Agriculture.
Producers expressed much less optimism about their farm’s monetary efficiency this month. The Farm Monetary Efficiency Index declined to 126 from a report excessive 138 in April. Though Might’s index was 12 factors decrease than a month earlier, it was nonetheless the second highest studying because the monetary efficiency query was first posed in spring 2018 suggesting robust crop costs proceed to help farm incomes.
In Might, extra producers stated they anticipate to cut back their equipment purchases and development plans within the subsequent 12 months. The Farm Capital Funding Index declined 10 factors in Might to a studying of 65. This month’s survey included a brand new query targeted on producers’ plans to assemble new buildings or grain bins. 59% of respondents stated their development plans for the upcoming 12 months are decrease in comparison with a 12 months in the past and simply 28% stated their development plans had been about the identical as a 12 months in the past. Mintert stated, “rising development prices are possible a contributing issue to weaker development plans.”
Producers stay very involved about doable adjustments to US tax coverage. In a sequence of questions first posed final month, 78% of survey respondents stated they’re very involved that the adjustments in tax coverage being thought of will make passing their farm on to the subsequent era tougher. Moreover, 83% of producers anticipate capital positive aspects tax charges to rise over the subsequent 5 years; 71% are very involved a few doable lack of the step-up in value foundation for inherited estates; and 66% say they’re very involved a few doable discount within the property tax exemption for inherited estates.
After declining final month, the Lengthy-Run Farmland Worth Expectations Index rose 10 factors to a report excessive studying of 158, with two-thirds of producers within the survey saying they anticipate farmland values to rise over the subsequent 5 years. The Quick-Run Farmland Worth Expectation Index remained close to its all-time excessive, falling simply 2 factors beneath the report excessive set in April of this 12 months.
Producers additionally stay bullish on money rental charges. On the Might survey, producers who develop corn or soybeans had been requested about their expectations for money rental charges in 2022. Two-thirds (65%) of the corn/soybean growers within the survey anticipate subsequent 12 months’s money rental charges of their house space to rise above 2021’s. In a follow-up query, producers who stated they anticipate rental charges to rise had been requested by how a lot they anticipate them to rise within the subsequent 12 months. 43% of respondents stated they anticipate 2022 money rental charges to rise by 10% or extra and 39% stated they anticipate money rental charges to rise from 5% to as a lot as 10%.
Producers’ expectations for good versus dangerous instances in US agriculture have undergone a marked shift. For instance, in May 27% of respondents stated they anticipate good instances in US agriculture throughout the subsequent 5 years, the bottom studying within the survey’s historical past and down 12 factors from a month earlier. One driver of this shift seems to be the discrepancy between expectations for the crops versus livestock sectors within the upcoming 5 years. This month over half (54%) of respondents stated they anticipate widespread good instances for the crops sector within the subsequent 5 years whereas simply one-fourth (26%) of producers stated they anticipate widespread good instances for the livestock sector.
“The distinction in expectations for these two principal sectors of the agricultural financial system might assist clarify why producers seem like very bullish about farmland values and money rental charges whereas on the similar time expressing much less optimism about each present situations and future expectations for the agricultural financial system total,” stated Mintert.
Learn the complete Ag Financial system Barometer report at the Ag Barometer website. The location additionally affords further sources – resembling previous studies, charts and survey methodology – and a type to enroll in month-to-month barometer e-mail updates and webinars.