U.S. farmers remain optimistic on prices, concerned about tax proposals, Ag Barometer shows
U.S. farmers are becoming more optimistic about the ag economy, plan to buy more equipment, expect farmland values to continue to rise and are more likely to get vaccinated from the COVID-19 virus, according to the monthly Ag Economy Barometer.
The Ag Economy Barometer sentiment index is calculated each month from 400 U.S. agricultural producers’ responses to a telephone survey. This month’s survey was conducted from April 19-23, 2021.
April's reading of the barometer was 178, virtually unchanged from a month earlier when the index stood at 177 and just 5 points below its all-time high of 183, which was set back in October.
Compared to March, however, there was a small change in producers’ perspective on the ag economy as they became more optimistic about the future, while their appraisal of the current situation waned, according to the CME/Purdue University press release Tuesday.
In April, the farmers' expectations of the future of the ag economy rose 5 points to 169, whereas the Index of Current Conditions moved down 7 points to 195.
Both of the barometer’s sub-indices remain historically strong, with the Index of Current Conditions just 3% below its all-time high and the Index of Future Expectations reaching its second-highest reading since the survey’s inception in fall 2015, the CME/Purdue University press release stated.
Farmers see their operation's financial status improving.
The Farm Financial Performance Index rose to a record high reading of 138 in April, up 13 points from a month earlier and 83 points higher than in April 2020, according to the Ag Barometer.
"Strength in commodity prices continues to drive improving expectations for strong financial performance, even though many input costs are rising, the Ag Barometer authors stated in the press release.
Buying Farm Equipment
It's interesting to note that although the Ag Barometer's Farm Capital Investment Index declined 13 points in April compared to March, leaving the index at 75, when directly asked if they plan to buy more machinery, farmers' optimisim was evident."
Compared to March, more producers this month said they plan to increase their machinery purchases and fewer farmers said they plan to hold their future purchases unchanged from a year earlier. The difference in responses to these two investment questions could be reflective of both the run-up in costs and difficulty in scheduling construction projects across the U.S.," according to the CME/Purdue University press release Tuesday.
Farmers expect the rise in farmland values to continue unabated over the next year as the Short-Run Farmland Value Expectations Index rose to a record high reading of 159, 11 points higher than a month earlier, according to the CME/Purdue University press release Tuesday.
" This month’s reading stands in sharp contrast to a year ago when the short-run index bottomed out at a reading of 72. Producers were less optimistic, however, when queried about their longer-run (5-year) outlook for farmland values as the Long-Term Farmland Values Expectations Index declined 9 points in April to a reading of 148. The difference in producers’ short vs. long-term expectations could be an indication they are concerned that the rapid rise in farmland values currently underway might not be sustainable over the long run," authors of the Barometer stated.
In April, the Ag Barometer took the temperature of farmers, regarding tax policy proposals that are currently under consideration by the Biden administration and Congress.
The results found that almost all of the farmers surveyed are very concerned about the tax proposals.
"Nearly 9 out of 10 (87%) survey respondents said they expect capital gains rates to rise over the next five years. Three-fourths of producers in this month’s survey said they are “very concerned” about the possible elimination of the step-up in cost basis for farmland in inherited estates and just over two-thirds (68%) of respondents said they are “very concerned” about a possible reduction in the estate tax exemption for inherited estates. Perhaps the biggest issue facing farm families is their ability to pass their farm business on to the next generation. When asked if they are concerned that changes in tax policy being considered by Congress will make it more difficult to pass their farm on to the next generation of farmers in their family, 82% of producers said they are “very concerned” while an additional 13% of respondents said they are “somewhat concerned”, suggesting this issue is on the minds of nearly all ag producers," according to the CME/Purdue University press release Tuesday.
Attending Field Days
Responses were mixed, when the barometer asked farmers whether they would attend in-person ag field days, workshops, and educational events planned for 2021.
"On both the March and April barometer surveys, we asked producers if they are more or less likely to attend these programs than they were in 2020. Responses were mixed. Two-thirds to just over 70% of respondents said they are more likely to attend in-person events this year, but 28 to 35 percent of producers said they are less likely to attend in-person events. For program planners, this implies there is still a need to offer programs in a hybrid or virtual format to reach the broad audience of commercial ag producers," according to the CME/Purdue University press release.
The Ag Barometer survey asked producers about their vaccination plans since October 2020.
"The percentage of producers saying "they do not plan to get vaccinated" declined from a high of 37% in October to 28% in January and has fluctuated between 28 and 32% since that time," according to the press release.
This is equal to the studies of the general population.