In August 2023, the Purdue University-CME Group Ag Economy Barometer revealed a decline in farmers’ sentiment. The Ag Economy Barometer decreased by 8 points, settling at a reading of 115 for August, indicating a diminished confidence level among farmers.
The drop in sentiment primarily stemmed from farmers’ less optimistic views regarding the current state of their farms and the broader U.S. agriculture industry.
Meanwhile, the Current Conditions Index decreased by 13 points to reach 108. In addition, the Future Expectations Index also saw a decline in August, registering a reading of 119, down 5 points from the previous month.
Despite the overall sentiment decline, farmers’ assessment of their farm financial conditions remained relatively stable in August. The Farm Financial Performance Index only dipped by one point to 86. However, it was noticeably weaker than the previous year period when it stood at 99.
Most significantly, the Farm Capital Investment Index experienced a drop to 37, down eight points from July and two points lower than the previous year. Farmers cited rising prices for farm machinery and construction and increasing interest rates as the main reasons for their negative outlook on investment.
Farmers anticipate increased rates, but maintained farmland values
A substantial portion (60 percent) of surveyed farmers anticipated rising interest rates in the coming year. Their primary concerns for the next 12 months included the escalation of input costs (cited by 34 percent of respondents) and the prospect of rising interest rates (noted by 24 percent of respondents). A significant minority, 20 percent, also expressed concern about declining commodity prices.
Despite their concerns, farmers maintained a cautious optimism about farmland values. The Short-Term Farmland Values Expectation Index increased slightly to 126, while the long-term index remained steady at 151.
Of those surveyed, 39 percent expected farmland values to appreciate over the next year, and 63 percent anticipated value growth over the next five years.
Carbon contract interest remains robust
Interest in carbon contracts within row-crop agriculture remained robust. Six percent of corn and soybean growers engaged in discussions about receiving compensation for carbon sequestration on their farms, and 2 percent signed such contracts.
Nearly half of the farms negotiating contract terms were offered payment rates ranging from $10 to $20 per metric ton of captured carbon. However, some farms refrained from signing contracts due to their perception of inadequate payment levels.
»Related: Farmer sentiment back up, with future outlook on the rise