Farmer Sentiment Improves in May; Interest in Solar Leasing Rising

Farmer sentiment improved somewhat in May following a drop-off in April. The May reading of the Purdue University-CME Group Ag Economy Barometer came in at 108, up 9 points compared to April. Both of the barometer’s sub-indices rose as well, with the biggest improvement coming from the Index of Future Expectations, which climbed 11 points to 117, while the Current Conditions Index rose 6 points. Strengthening crop prices was a factor in this month’s sentiment improvement. For example, Eastern Corn Belt cash corn prices in mid-May were 6 to 7% higher than when the April survey was conducted, while cash soybean prices improved by 2 to 3% over the same period. The improvement in prices coincided with good corn and soybean planting progress as USDA reported the planting pace in mid-May matched the 5-year average.

The Farm Financial Performance Index climbed to 82, up 6 points compared to April. The index is based on a question that asks producers to compare their farm’s expected financial performance to last year. Despite this month’s improvement in the index, it remained 15 points lower than at the end of last year indicating that producers still expect 2024 to be a more challenging year financially than 2023.

Producers’ outlook on capital investments improved in May, but producers maintained a cautious attitude towards investments as the Farm Capital Investment Index rose 4-points. Interest rates and relatively high prices for farm machinery and new construction were the two primary reasons cited for their cautionary approach to large investments. Among those producers who think it’s a good time to invest, nearly half said they felt that way because of high inventories at machinery dealers.

Producers’ perspective on farmland values changed little in May compared to a month earlier as the Short-Term Farmland Value Expectations Index rose just 3 points. Reviewing producers’ short-term farmland value outlook over the last several months and comparing it to results from last fall reveals a weaker outlook among producers in 2024 than in fall 2023. During the first five months of 2024, the index averaged 116 compared to an average of 124 during October-December 2023. Producers who expect values to rise over the next year consistently point to non-farm investor demand and inflation as the top two reasons for their optimistic outlook on farmland. In both the April and May surveys, the question’s response categories were expanded to include energy production from wind and solar installations. Interestingly, in May, 12% of the bullish respondents pointed to energy production as a key reason for their outlook, up from 8% in the April survey.

Interest in leasing farmland for solar energy production continues to rise. In both the April and May surveys approximately 20% of survey respondents, up from just 12% in March, said they have discussed leasing farmland for solar energy production in the last six months. Like April’s survey results, over half (55%) of respondents said they were offered a long-term lease rate of $1,000 per acre or more, and 27% said they were offered more than $1,250 per acre. Combining results from both the April and May barometer surveys, approximately 30% of respondents who have discussed leasing with a company have signed a solar energy lease on farmland they control.

EDITOR’S TAKE:

Don’t bother farmers/ranchers with surveys during planting/calving season – they aren’t pre-disposed to be optimistic during that very stressful time. Ask them after the stress is lower and their attitudes improve – as is the case with the most recent Purdue Ag Barometer survey.

The latest survey shows improved attitudes in most categories. Yes, they are going to have a more challenging year financially, but they also realize that input costs were lower than expected. Land values are holding steady. And prices have provided windows to lock in prices that ensure a profit on several crops. All in all, a positive report. Reason enough for you to keep posting your inventory on AgTruckTrader.com®. Farmers/ranchers will have good incomes this year and they will continue to purchase trucks. Make sure they purchase those trucks from a Certified Ag Dealer like you!