U.S. farmers’ outlook improved in May as the Purdue University/CME Group Ag Economy Barometer index rose to 108, marking a 9-point increase from April, the lowest reading since June 2022.
Both of the barometer’s subindices increased, with the Index of Future Expectations climbing 11 points to 117 and the Current Conditions Index rising 6 points. This month’s Ag Economy Barometer survey was conducted from May 13 to 17, 2024.
The boost in the Index of Future Expectations reflects farmers’ expectation that conditions will improve, although it’s clear that 2024’s financial challenges are still a concern. A rise in crop prices from the April survey’s date to mid-May played a role in boosting farmer sentiment this month.
By mid-May, Eastern Corn Belt cash corn prices had increased by 6% to 7 percent, and soybean prices had risen by 2 percent to 3 percent since the April survey was conducted. The improvement in prices along with good corn and soybean planting progress contributed to the sentiment improvement.
The Farm Financial Performance Index rose to 82 in May, a 6-point increase from April. The index asks producers to compare their farm’s expected financial performance to last year. However, despite the gain, the index remains 15 points lower than at the end of last year, indicating that producers still anticipate 2024 being a more financially challenging year than 2023.
Producers’ one-year ahead views on farmland values in May remained steady, with a small 3-point increase in the Short-Term Farmland Value Expectations Index. Compared to last fall, producers’ farmland value outlook has weakened in 2024, as indicated by an average index value of 116 from January to May, down 6 percent from the average of 124 from October to December 2023.
Solar energy production on the rise
Those expecting higher farmland values in the coming year point to nonfarm investor demand and inflation as key drivers for their optimism. Notably, the survey expanded its response categories in April and May to include energy production from wind and solar installations as a possible reason to expect values to rise. In May, 12 percent of optimistic respondents cited energy production as a factor for their positive outlook, up from 8% in April. While the overall outlook on farmland values showed little change in May, it appears the evolving landscape of energy production is beginning to play a role in producers’ views.
Interest in developing Carbon Capture and Storage (CCS) projects by ethanol plants is rising, partly driven by tax credits in the Inflation Reduction Act. This month’s survey inquired about farmers’ experiences with potential CCS projects being developed by ethanol plants. Seven percent of respondents reported being approached about such projects. Payment rates per acre ranged from under $26 to over $50, indicating there is a lot of payment rate variability. Future surveys will delve deeper into CCS project specifics.
Interest in leasing farmland for solar energy production is on the rise, according to recent survey findings. In both April and May, approximately 20 percent of respondents — up from just 12 percent in March — have discussed leasing farmland for solar energy production within the last six months.
Notably, over half of respondents were offered long-term lease rates of $1,000 per acre or more, with 27 percent receiving offers exceeding $1,250 per acre. Combining data from the April and May surveys reveals that approximately 30 percent of the respondents who explored leasing options have now signed solar energy leases for farmland they control.