October provided a surprising pre-election bounce in farmer sentiment as the Purdue University-CME Group Ag Economy Barometer index climbed to 115 – that’s 27 points more than in September.
The biggest driver of the sentiment improvement was an increase in producer confidence in the future; the Future Expectations Index jumped 30 points to 124. The Current Conditions Index also increased in October but by a smaller amount. With a reading of 95, the Current Conditions Index confirmed that farmers think economic conditions this year are worse than the previous year and weaker than during the barometer’s base period of 2015-2016. That was in the early days of a multi-year downturn in the U.S. farm economy. Producers this month expressed some optimism that economic conditions will improve and not precipitate an extended downturn in the farm economy. The October barometer survey took place Oct. 14-18.
The overall improvement in farmer sentiment is better understood by examining responses to the individual questions used to generate the barometer. Much of the sentiment improvement was attributable to producers possessing a less-pessimistic view of the U.S. agricultural economy. For example the percentage of producers who expect bad times for the U.S. agricultural economy in the upcoming year declined from 73 percent of respondents in September to 53 percent in October.
Similarly the percentage of producers who expect bad times for U.S. agriculture in the next five years decreased from 48 percent to 33 percent. Looking at a related question, fewer producers this month said they expect their farm’s financial condition to worsen during the next 12 months. There were just 23 percent looking for conditions to worsen compared to 38 percent who felt that way in September. But despite the improvement in the main barometer indices, it’s clear producer financial situations deteriorated in 2024. For example more than half of October respondents said their farm’s financial condition was worse than a year earlier. That was less than reported in September but matches the response to that question in August.
The last question on each month’s survey provides respondents with an open-ended question asking them to share what’s on their minds. Figure 3 is a “word cloud” representation of responses received in the October survey. Unsurprisingly politics was mentioned quite often, with the elections looming just a few weeks into the future. Perhaps more importantly, it’s clear many producers were thinking about possible policy shifts that could impact their farms and the agricultural economy. Mentions of regulation, environment and taxes were featured prominently, along with concerns about prices.
When asked explicitly about their biggest concerns for the upcoming year, producers still point to increased input costs and reduced output prices as their biggest concerns. The trend continued this month of fewer producers citing interest rates as an important concern. Just 15 percent of producers, a decrease from as much as 26 percent of producers in late 2023, chose interest rates as one of their biggest concerns in October.
One of the biggest surprises from this month’s survey was the increase in the Farm Financial Performance Index. The index is based upon a question that says, “As of today, do you expect your farm’s financial performance in the next 12 months to be better than, worse than or about the same as in the past 12 months?” The October reading of 90 jumped to 22 points more than September’s and was just 2 points less than a year earlier.
Larger fall crop yields and a stress-free fall harvest season in the Corn Belt and Plains states likely contributed to the index’s increase. But those two factors alone don’t account for the index’s sharp increase. The index’s improvement provides another indication that farmer optimism about the future shifted in October, leading to an expectation of better financial performance in 2025 than in 2024. Coincident with the increase in the financial index was a modest improvement in the Farm Capital Investment Index, which at 42 was 7 points more than in September. That’s another signal that producers in October might be viewing 2024’s weak income prospects as transitory.
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