WEST LAFAYETTE, Ind. and CHICAGO, June 1, 2021 /PRNewswire/ — The Purdue University/CME Group Ag Economy Barometer noticed a big decline in Might, down 20 factors to a studying of 158. This marks the bottom studying for the survey since September of 2020. Producers had been much less optimistic about each present situations and the way forward for the agricultural financial system. The Index of Present Situations dropped 17 factors to a studying of 178 and the Index of Future Expectations fell 20 factors to a studying of 149. The Ag Financial system Barometer is calculated every month from 400 U.S. agricultural producers’ responses to a phone survey. This month’s survey was performed from Might 10-14, 2021.
“The potential for altering tax guidelines and rising enter prices seemed to be on producers minds this month and had been the first drivers for the Ag Barometer‘s decline,” mentioned James Mintert, the barometer’s principal investigator and director of Purdue College’s Middle for Business Agriculture.
Producers expressed much less optimism about their farm’s monetary efficiency this month. The Farm Monetary Efficiency Index declined to 126 from a report excessive 138 in April. Though Might’s index was 12 factors decrease than a month earlier, it was nonetheless the second highest studying because the monetary efficiency query was first posed in spring 2018 suggesting robust crop costs proceed to assist farm incomes.
In Might, extra producers mentioned they count on to cut back their equipment purchases and building plans within the subsequent yr. The Farm Capital Funding Index declined 10 factors in Might to a studying of 65. This month’s survey included a brand new query centered on producers’ plans to assemble new buildings or grain bins. Fifty-nine p.c of respondents mentioned their building plans for the upcoming yr are decrease in comparison with a yr in the past and simply 28% mentioned their building plans had been about the identical as a yr in the past. Mintert mentioned, “rising building prices are possible a contributing issue to weaker building plans.”
Producers stay very involved about doable adjustments to U.S. tax coverage. In a sequence of questions first posed final month, 78% of survey respondents mentioned they’re very involved that the adjustments in tax coverage being thought of will make passing their farm on to the subsequent technology harder. Moreover, 83% of producers count on capital good points tax charges to rise over the subsequent 5 years; 71% are very involved a couple of doable lack of the step-up in price foundation for inherited estates; and 66% say they’re very involved a couple of doable discount within the property tax exemption for inherited estates.
After declining final month, the Lengthy-Run Farmland Worth Expectations Index rose 10 factors to a report excessive studying of 158, with two-thirds of producers within the survey saying they count on farmland values to rise over the subsequent 5 years. The Brief-Run Farmland Worth Expectation Index remained close to its all-time excessive, falling simply 2 factors beneath the report excessive set in April of this yr.
Producers additionally stay bullish on money rental charges. On the Might survey, producers who develop corn or soybeans had been requested about their expectations for money rental charges in 2022. Two-thirds (65%) of the corn/soybean growers within the survey count on subsequent yr’s money rental charges of their dwelling space to rise above 2021’s. In a follow-up query, producers who mentioned they count on rental charges to rise had been requested by how a lot they count on them to rise within the subsequent yr. Over 40 p.c (43%) of respondents mentioned they count on 2022 money rental charges to rise by 10 p.c or extra and 39% mentioned they count on money rental charges to rise from 5 to as a lot as 10 p.c.
Producers’ expectations for good versus unhealthy instances in U.S. agriculture have undergone a marked shift. For instance, in May 27% of respondents mentioned they count on good instances in U.S. agriculture in the course of the subsequent 5 years, the bottom studying within the survey’s historical past and down 12 factors from a month earlier. One driver of this shift seems to be the discrepancy between expectations for the crops versus livestock sectors within the upcoming 5 years. This month over half (54%) of respondents mentioned they count on widespread good instances for the crops sector within the subsequent 5 years whereas simply one-fourth (26%) of producers mentioned they count on widespread good instances for the livestock sector.
“The distinction in expectations for these two principal sectors of the agricultural financial system may assist clarify why producers look like very bullish about farmland values and money rental charges whereas on the identical time expressing much less optimism about each present situations and future expectations for the agricultural financial system total,” mentioned Mintert.
Learn the complete Ag Financial system Barometer report at https://purdue.ag/agbarometer. The location additionally provides further assets – similar to previous studies, charts and survey methodology – and a kind to join month-to-month barometer electronic mail updates and webinars.
Every month, the Purdue Middle for Business Agriculture offers a brief video evaluation of the barometer outcomes, out there at https://purdue.ag/barometervideo, and for much more info, take a look at the Purdue Business AgCast podcast. It features a detailed breakdown of every month’s barometer, along with a dialogue of current agricultural information that impacts farmers. Obtainable now at https://purdue.ag/agcast.
The Ag Financial system Barometer, Index of Present Situations and Index of Future Expectations can be found on the Bloomberg Terminal beneath the next ticker symbols: AGECBARO, AGECCURC and AGECFTEX.
In regards to the Purdue College Middle for Business Agriculture
The Center for Commercial Agriculture was based in 2011 to offer skilled improvement and academic packages for farmers. Housed inside Purdue College’s Division of Agricultural Economics, the middle’s school and employees develop and execute analysis and academic packages that deal with the completely different wants of managing in in the present day’s enterprise surroundings.
About CME Group
Because the world’s main and most numerous derivatives market, CME Group (www.cmegroup.com) permits shoppers to commerce futures, choices, money and OTC markets, optimize portfolios, and analyze knowledge – empowering market contributors worldwide to effectively handle threat and seize alternatives. CME Group exchanges supply the widest vary of worldwide benchmark merchandise throughout all main asset lessons based mostly on interest rates, equity indexes, foreign exchange, energy, agricultural products, and metals. The corporate provides futures and choices on futures buying and selling via the CME Globex® platform, mounted earnings buying and selling through BrokerTec and international alternate buying and selling on the EBS platform. As well as, it operates one of many world’s main central counterparty clearing suppliers, CME Clearing. With a spread of pre- and post-trade services and products underpinning the complete lifecycle of a commerce, CME Group additionally provides optimization and reconciliation companies via TriOptima, and commerce processing companies via Traiana.
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Picture Caption: Ag Financial system Barometer declines sharply; producers stay bullish on farmland values. (Purdue/CME Group Ag Financial system Barometer/James Mintert). https://www.purdue.edu/uns/images/2021/ag-barometer521LO.jpg
SOURCE CME Group