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 While the overall reading for the Ag Economy Barometer changed
very little compared to January, down 2 points to a reading of
165 in February; the Index of Current Conditions remained near
its all-time high at a reading of 200. Meanwhile, the Index of
Future Expectations continued a four-month decline, down 20%
from its October peak, to a reading of 148.
The Ag Economy Barometer is calculated each month from 400 U.S.
agricultural producers’ responses to a telephone survey. This
month’s survey was conducted Feb. 15-19.
“The ongoing strength in ag commodity prices and farm income
continue to support producers’ perspective on current
conditions,” said James Mintert, the barometer’s principal
investigator and director of Purdue University’s Center for
Commercial Agriculture. “At the same time, concerns about
possible policy changes affecting agriculture, and eroding
confidence in future growth in ag trade, continue to weigh on
producers’ future expectations.”
Producers are very bullish about farmland values. Fifty-one
percent of respondents in February said they expect farmland
values to rise during the next year, up 8 points from the
January survey. U.S. farmers were also optimistic about the
long-run trend in farmland values, as 62% of respondents
indicated farmland values are likely to rise over the next five
years.
That same bullishness spilled over into expectations for rising
farmland cash rental rates in 2021. In February, more producers
(36%) now say they expect cash rental rates to increase,
compared to just 18% who felt that way in December. Those
expecting rates to remain unchanged fell from 75% to 61%, the
decrease primarily due to more producers’ expecting rental rates
to increase.
The percentage of farms expecting to see a better financial
performance in 2021 compared to the prior year has been rising
since last summer and on the February survey reached 37%, up 4
points from January and 25 points higher than last July. When
asked about their perception of the most critical risk facing
their operation, 29% ranked production, up 8 percent from
February 2020, and 18% ranked financial risk, down 8% from one
year ago.
Each winter the barometer survey asks respondents about plans
for growth on their farms. This winter: Fifty percent of
commercial-scale farms reported that they either have no plans
to grow or plan to exit/retire in the next five years; 17%
expect their farm operation to grow at a rate of less than 5%
annually; 25% expect their operation to grow 5%-10% annually;
and 9% expect their farm to grow more than 10% per year.
Overall, Mintert said, these results point toward continued
consolidation in the farm sector.
Although producers are optimistic about the current situation on
their farms, confidence in the future continues to erode.
Reasons behind the 20% decline in the Index of Future
Expectations that has taken place since October appear centered
on concerns about the long-term future for agricultural trade
and uncertainty about a variety of policies affecting
agriculture. In February, only 45% of farmers expected ag
exports to increase over the next 5 years, down from 65% in
October. The percentage expecting a favorable outcome to the
U.S. trade dispute with China is also down, 37% in February
compared with 65% in October.
“Even though we have seen a recent ‘ramp-up’ in ag exports to
China, producers remain worried about the future of ag trade,”
said Michael Langemeier, associate director of the Center for
Commercial Agriculture. “They are also concerned about the
possibility of more restrictive environmental regulations as
well as higher estate and income taxes, all expressed on
previous barometer surveys. Uncertainty about all these factors
appears to be the motivation for the divergence between farmers’
perspective on the current versus the future situation.”
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Interest in alternative protein sources has increased
markedly over the last year. Respondents on the February survey were
asked several questions to learn about their perspectives on the
possible impact of alternative proteins on U.S. agriculture. More
than half of producers indicated they expect to see alternative
protein sources increase market share in the years ahead (55% expect
a total protein market share of up to 10%; 15% expect total market
share to exceed 10%) and, indicated that if the market share becomes
significant, they think it’s likely to reduce aggregate farm income.
Read the full Ag Economy Barometer report. The site also offers
additional resources – such as past reports, charts and survey
methodology – and a form to sign up for monthly barometer email
updates and webinars.
Each month, the Purdue Center for Commercial Agriculture provides a
short video analysis of the barometer results, and for even more
information, check out the Purdue Commercial AgCast podcast. It
includes a detailed breakdown of each month’s barometer, in addition
to a discussion of recent agricultural news that impacts farmers.
Available now.
The Ag Economy Barometer, Index of Current Conditions and Index of
Future Expectations are available on the Bloomberg Terminal under
the following ticker symbols: AGECBARO, AGECCURC and AGECFTEX.
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.
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[Writer: Kami Goodwin
Source: James Mintert] |
