Farmer Sentiment Rallied 6 Points in April

Farmer sentiment improved in April as the Purdue University/CME Group Ag Economy Barometer rose 6 points to a reading of 123. Both of the barometer’s sub-indices were also higher in April, the Current Conditions Index was up 3 points to 129 and the Future Expectations Index was up 7 points to 120. A shift in farmers’ expectations regarding the Fed’s future interest rate policy could be a key reason behind the improvement in farmer sentiment.

The Farm Financial Performance Index also improved, up 7 points to a reading of 93. The prime interest rate charged by U.S. commercial banks increased from 7.75% in January to 8% in late March, and since the February barometer survey, there has been a noticeable shift in farmers’ interest rate expectations. In April, 34% of respondents said they expect the U.S. prime interest rate to remain unchanged or decline over the next year, compared to 25% of producers who felt that way in February. At the same time, two-thirds (66%) of producers expect interest rates to keep rising, compared to 75% of respondents who felt that way in February. However, the biggest shift was a decline in the percentage of respondents who expect rates to rise between 1 to 2 percent in the next year, down 6 points since February to 37%. The Farm Capital Investment Index also increased one point in April.

Producers’ expectations for short-term farmland values increased in April following five-straight months of decline. The Short-Term Farmland Value Expectations Index rose 10 points in April to a reading of 123, while the long-term farmland index held steady at a reading of 142.

Farm bill discussions are heating up and this survey included questions to learn more about producers’ perspectives on the legislation. When asked about the likelihood that a new farm bill will be passed this year, 12% of respondents think it’s very likely, 28% said somewhat likely, 16% said somewhat unlikely, and 13% said very unlikely. The survey also questioned corn and soybean producers on what they consider to be the most important aspect of a new farm bill. Of those respondents, 40% chose crop insurance, 31% chose commodity programs, 13% chose conservation, 8% chose agricultural research and extension, and 8% chose renewable energy as a top priority to them.

Leasing farmland for solar energy production continues to be a hot topic. This survey revealed that 15% of respondents said they had actively engaged in discussions with companies about leasing farmland for solar energy production in the past 6 months. Of those producers, nearly half indicated that lease rates of $1,000 or more per acre were discussed. Twenty-five percent of respondents said that, following the development and construction period, they were offered a lease rate of $1,250 or more per acre, while 22% of respondents said they were offered between $1,000 and $1,250 per acre. On the other end of the spectrum, 32% of respondents said they were offered lease rates of less than $500 per acre.

EDITOR’S TAKE:

Spring has sprung, farmers’/ranchers’ thoughts and days are filled with planting, calving, milking and what the future might bring. It’s obvious from April’s Purdue Ag Barometer Survey results that farmers are becoming more optimistic pretty much across the board. They see prospects for good yields (assuming the weather cooperates). Prices are holding up fairly well. And, input costs are declining over time. Thus, they are in a pretty good state of mind. That said, you should consider taking full advantage of this good sentiment. Now is a great time to let farmers/ranchers know how much you would appreciate their business. Ask them to visit your dealership once the spring season calms down and before fall harvest gets into full swing. Make sure you let them know about all the CAD program has to offer and why you are a CAD member!