Monetary considerations proceed to loom
18 March 2024
4 minute learn
The Purdue College-CME Group Ag Financial system Barometer rose modestly in February, posting a studying of 111, 5 factors increased than a month earlier. The modest rise within the barometer was attributable to producers expressing considerably extra optimism in regards to the future because the Future Expectations Index rose 7 factors to a studying of 115 whereas the Present Circumstances Index was unchanged, each in comparison with a month earlier. Though farmers’ expectations for the long run improved in February, their monetary efficiency expectations didn’t. February’s Farm Monetary Efficiency Indexstudying of 85 was 1 level decrease than in January and 13 factors beneath its most up-to-date peak in December. Weak crop costs proceed to weigh on monetary expectations as mid-February Japanese Corn Belt money costs for corn and soybeans had been 7 and eight% decrease, respectively, than two months earlier when the December survey was carried out.
When requested about their largest considerations for his or her farm operation within the upcoming 12 months, producers on this month’s survey continued to level to “excessive enter prices” (34% of respondents) and “decrease crop/livestock costs” (28% of respondents) as their high two considerations. Rate of interest worries amongst agricultural producers might need peaked as simply 18% of February respondents cited “rising rates of interest” as a high concern, down from 26% as just lately as final November.
The Farm Capital Funding Index remained weak in February, declining 1 level to a studying of 34 which was 9 factors decrease than a 12 months earlier. Responses from producers who stated now could be a foul time to make giant investments mirrored their considerations about excessive manufacturing prices and weak output costs. The proportion of farmers who stated it’s a foul time due to “uncertainty about farm profitability” has tripled since final October. This month 22% of respondents pointed to farm profitability considerations in comparison with simply 7% who cited that as a key motive to carry again on investments final fall.
Producers’ short-run expectations for farmland values had been unchanged from January’s because the Quick-Time period Farmland Values Expectations Index studying was 115 in each months. In comparison with a 12 months earlier, nonetheless, the index was down 4 factors, and it was additionally 30 factors decrease than two years in the past. Though extra producers anticipate farmland values to rise than fall within the subsequent 12 months inflicting the index worth to be above 100, it’s clear that sentiment amongst producers about future will increase in farmland values is weaker than it was a few years in the past. The optimists in barometer surveys proceed to level to “non-farm investor demand” as the first motive they anticipate farmland values to proceed rising.
Annually in February the barometer survey queries respondents concerning plans for his or her farm with a query centered on their farm operation’s development plans for the upcoming 5-year interval. This 12 months almost 4 out of 10 (38%) producers stated they’ve “no plans to develop” and a further 14% of respondents stated they plan to “exit or retire from farming”. However, simply over 3 out of 10 respondents on this month’s barometer survey stated they anticipate their farm’s annual development price to exceed 5%. To assist put development charges in perspective, take into account {that a} farm operation rising at a 5% annual price will double in measurement in about 14 years whereas a farm rising at a ten% annual price will want simply 7 years to double in measurement.
Curiosity in leasing farmland for photo voltaic power growth continues to be sturdy. The February survey queried producers concerning whether or not they have mentioned the set up of a photo voltaic power mission with an organization within the final six months. If a respondent indicated they’d been concerned in discussing a doable photo voltaic lease, a follow-up query requested, following the development of the photo voltaic mission, what annual fee price per acre was provided. Ten p.c of respondents this month stated they’d mentioned a photo voltaic leasing mission with an organization within the final 6 months. Cost charges provided different broadly, nevertheless it was notable that over half of respondents stated they had been provided a lease price of $1,000 per acre or extra.
Wrapping up
Producers expressed a bit extra optimism in regards to the future within the February survey than in January, which pushed the Ag Financial system Barometer up barely. Nonetheless, expectations for his or her farms’ monetary efficiency within the upcoming 12 months didn’t enhance because the Farm Monetary Efficiency Index remained 13 factors decrease than in December. Though farmers’ short-run expectations for farmland values had been unchanged in comparison with a month earlier, it’s clear that producers will not be as assured that farmland values will proceed to rise as they had been two years in the past when the short-run farmland index was 30 factors increased than it was this month. Lastly, producers who’ve engaged in discussions with firms about photo voltaic leasing their farmland point out that per acre fee charges following development have been rising with over half of them indicating they had been provided a price of $1,000 or extra per acre.
The February Ag Financial system Barometer survey was carried out from February 12-16, 2024.
