US ag economy barometer posts sharp declines in May

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The US economic barometer for the agglomeration recorded sharp falls in May

June 10, 2021

The Ag economic barometer fell 20 points in May as producers remain bullish on farmland values.

The Purdue University / CME Group Ag Economic Barometer saw a significant drop of 20 points to 158 in May, the lowest value for the survey since September 2020.

Producers were less optimistic about both current conditions and the future of agriculture. The index of the current conditions dropped 17 points to 178 and the Future Expectations Index fell 20 points to 149. The Ag economic barometer is calculated every month from the responses of 400 US agricultural producers to a telephone survey. The survey was conducted this month from May 10-14, 2021.

“The potential for changes in tax regulations and rising input costs seemed to be in the minds of producers this month and were the main drivers for them Ag barometers Decline, ”said James Mintert, the barometer’s senior investigator and director of the Center for Commercial Agriculture at Purdue University.

Growers were less optimistic about their farm’s financial performance this month. The Farm Financial Performance Index Performance declined from a record high of 138 in April to 126. Although the index was 12 points lower in May than a month earlier, it was still the second highest since the first financial performance question in Spring 2018, suggesting the high Crop prices continue to support farm incomes.

In May, more manufacturers said they would cut their machine purchases and blueprints for the next year. The Farm Capital Investment Index declined 10 points to 65 in May. This month’s poll included a new question that focused on growers’ plans to build new buildings or grain bins. 59% of respondents said their construction plans for the coming year are lower compared to last year, and only 28% said their construction plans were about the same as they were a year ago. Mintert said, “Rising construction costs are likely contributing to weaker construction plans.”

Manufacturers remain very concerned about possible changes in US tax policy. In a series of questions first asked last month, 78% of respondents said they are very concerned that the changes in tax policy they are considering will make it difficult for their farm to pass on to the next generation. In addition, 83% of manufacturers expect capital gains tax rates to rise over the next five years; 71% are very concerned about a possible loss of inheritance cost top-up; and 66% say they are very concerned about a possible reduction in inheritance tax exemption for inheritance.

After the decline last month is the Index of long-term value expectations for arable land rose 10 points to a record 158, with two-thirds of growers in the survey saying they expect arable land values ​​to rise over the next five years. The short-term farmland value expectation index stayed near its all-time high, falling just 2 points below the record high set in April this year.

Producers also remain optimistic about bar rental prices. In the May survey, producers who grow corn or soybeans were asked about their expectations for bar rental prices to rise in 2022 over 2021. In a follow-up question, producers who said they expected rental prices to rise were asked by how much they expect them to rise in the next year. 43% of respondents said they expect bar rental prices to increase by 10% or more in 2022, and 39% said they expect cash rents to increase from 5% to as much as 10%.

Producer expectations of good or bad times in US agriculture have shifted significantly. For example, in May, only 27% of respondents said they expected good times in US agriculture in the next five years, the lowest in the history of the survey and 12 points less than a month earlier. One driver of this shift appears to be the discrepancy between expectations for the plant and livestock sectors over the next five years. That month, over half (54%) of respondents said they expect the crops sector to be generally good times in the next five years, while only a quarter (26%) of producers said they expect the livestock sector to be generally good times .

“The different expectations for these two main sectors of agriculture could help explain why producers appear to be very optimistic about farmland values ​​and bar rental prices, while at the same time less optimistic about both current conditions and future expectations for the agricultural economy express. “Overall,” said Mintert.

Read the full report on the Ag Economic Barometer at the Ag Barometer website. The website also offers additional resources – such as past reports, charts, and survey methods – and a form to sign up for monthly barometer email updates and webinars.





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