The February Purdue University/CME Group Ag Economy Barometer reading reached 111, a 5-point rise from last month. The uptick is attributed to producers expressing increased optimism about the future, with the Future Expectations Index climbing 7 points to 115.
However, the Current Conditions Index remained unchanged. Farmers’ financial performance expectations did not keep pace despite their improved outlook for the future. February’s Farm Financial Performance Index registered at 85, a slight dip from January and notably lower than its recent peak in December. The February survey was conducted from Feb. 12-16.
Continuously low crop prices continue to put a squeeze on financial forecasts. In mid-February, cash prices for corn and soybeans in the Eastern Corn Belt dropped by 7 percent and 8 percent respectively compared to two months earlier.
When farmers were asked about their main worries for the upcoming year, about 34 percent said they were most concerned about “high input costs,” while 28 percent indicated “lower crop/livestock prices.” Surprisingly, rising interest rates were less of a concern this month, with only 18 percent of farmers noting them as a top concern in February, down from 26 percent in November.
The Farm Capital Investment Index also struggled a bit this past month, sitting at a weak 34 points, which is 9 points lower than last year. Farmers who are hesitant about making big investments mainly stress how expensive it is to produce stuff and how much they’re getting paid. The number of farmers worried about making a profit has tripled since last October. This month, 22 out of every 100 farmers indicated concerns, compared to 7 out of every 100 last fall.
Every February, the barometer survey checks in with producers to see where they’re headed regarding growth for the next five years. Almost 40 percent of respondents said they’re not planning on any expansion this year, while 14 percent are eyeing the exit or retirement door. But on the flip side, a little over 30 percent are feeling bullish about their farm’s growth, expecting it to climb by more than 5 percent each year. These responses, pretty consistent over the years, suggest that farms are likely to keep merging or getting bigger.
Meanwhile, interest in leasing farmland for solar energy projects is still strong. About 10 percent of respondents have been mulling over these projects in the past six months. And it’s not just talk – more than half of them have been offered lease rates of $1,000 per acre or more. The upper limit for these rates seems to be creeping up over time. In June 2021, only 27 percent of respondents reported such high lease rate offers, compared to a whopping 56 percent this year. Looks like solar energy on farmland is catching on!