Farmers more optimistic about ag economy in March

WEST LAFAYETTE, Ind. — Farmers were more optimistic about the ag economy in March, according to the Purdue University/CME Group Ag Economy Barometer.

The index increased to 114 — that is 3 points higher than in February.

The Index of Future Expectations increased to 120, up by 5 points compared to February. The Index of Current Conditions fell by 2 points to 101.

“The disparity between current and future indexes was primarily attributable to farmers’ perceptions that a financial downturn took place over the past year, coupled with expectations for some improvement over the next 12 months,” the report said.

Interest Rate

More producers expected a decline in the U.S. prime interest rate over the next year. One third of producers foresee an interest rate increase.

Only 20% of respondents this month identified the risk of rising interest rates as a primary concern, a decrease from the 24% in December 2023.

High input costs continue to be producers’ top concern.

Investment Index

A rise in the Farm Capital Investment Index signals more optimism when it comes to making large investments on the farm.

“Producers who said it is a good time for a large investment rose to 15%, up from 11% at the start of the year,” the report said.

“Producers who said it’s a good time to invest pointed to strong cash flows on their farms coupled with higher dealer inventories for farm machinery as key reasons.

“However, a majority of producers still feel hesitant to invest due to concerns about high costs for machinery and construction as well as high interest rates.”

Farmland Values

Farmers were more optimistic about short-term farmland values in March compared to February. The Short-Term Farmland Values Index increased to 124, up 9 points from February.

Thirty-eight percent of producers expect farmland values to increase in the coming year, compared to 31 percent in January and February.

“Factors contributing to this optimism included non-farm investor demand, inflation expectations and strong cash flows,” the report said.

“An improved interest rate outlook might have been a factor, as well, although producers didn’t point to that explicitly in this month’s survey.”

Other Takeaways

• Interest in using farmland for carbon sequestration or solar energy production appears to be increasing.

• Nearly 1 out of 5 respondents said they or their landowners had been approached about carbon capture utilization and storage on their farmland.

• Twelve percent of farmers said they had discussions with companies interested in leasing farmland for a solar energy project in the last six months

• Many farmers are concerned about potential government policy changes affecting their farms following this year’s elections.

• Forty-three percent of respondents anticipate more restrictive regulations for agriculture.

• Four out of 10 producers expect taxes impacting agriculture to rise.

Read the complete report at ag.purdue.edu/commercialag/ageconomybarometer.