The Purdue University/CME Group Ag Economy Barometer index improved in June, rising 17 points to a reading of 121. The upswing in sentiment was driven by producers’ more optimistic view of the future; however, their perception of current conditions remained unchanged from May. The Index of Future Expectations rose 25 points to a reading of 123, while the Index of Current Conditions held flat at a reading of 116 in June. Optimism about U.S. agriculture’s future and a more sanguine interest rate outlook help explain producers’ more positive view of the future expressed in June’s survey.
To better understand the large month-to-month swing in producers’ expectations for the future, responses between the May and June surveys were compared. In June, 20% of respondents said they expected their financial condition to improve over the next year, compared to just 13% who said that in May. Meanwhile, only 32% expect their farm’s financial situation to decline over the upcoming year, compared to 44% who responded that way in May. Producers’ improved perspective on the future was not focused solely on their own farms, but extended to all of U.S. agriculture. The percentage of producers expecting good times for U.S. agriculture in the next 5 years rose 8 points while the percentage of producers expecting bad times fell 3 points.
The Farm Financial Performance Index also rose in June, up 10-points from May and was likely a result of a late-May to early-June rally in harvest time prices for corn and soybeans, as well as optimism towards positive returns for cattle producers. In June, 50% of respondents said they expect “good times” for livestock producers in the next 5 years, up from 37% in May. Optimism about positive returns for cattle producers, especially cow-calf operations, was likely a key factor behind the positive livestock outlook.
Producers were more optimistic about farmland values in June as both the short and long-run farmland value indices rose. The short-term index, which asks producers about their outlook over the next 12 months, jumped 16 points to a reading of 126, its highest reading since last November. Meanwhile, the long-term index, which asks producers to look ahead 5 years, rose a more modest 6 points to a reading of 151, pushing that index up to its highest level since February 2022. Additionally, 43% of producers in the June survey think interest rates have peaked and nearly a quarter of survey respondents expect to see lower interest rates within the next year.
EDITOR’S TAKE:
You may not recall, but following the previous Ag Barometer we predicted that once planting and calving season was complete and commodity prices rose once more, farmers/ranchers would be more optimistic. Low and behold, just as predicted, the June report from Purdue was very optimistic indeed. Just like many of us, when pressure is intense and you’re struggling to keep all the loose ends tied together, it is more challenging to remain positive, hence the May report. Contrast that to the June report when prices are better and the pressure is less – optimism emerges. Chances are good that farmers/ranchers are going to have a solid year financially. And, as you might expect, that optimism carries over into the future expectations. Now is a very good opportunity to let the farmers and ranchers in your area know about the pre-harvest specials you are offering in the parts and service departments. Even better, if you have a mobile service unit, offer to service their fleet at their location.
