Farmer Sentiment Rallied 6 Points in April Ag Economy Barometer

Farmer sentiment rallied 6-points to 123 in April, based on Purdue’s Ag Economy Barometer. The reason for the shift is rooted in financial improvements, according to James Mintert, professor in the Department of Ag Economics at Purdue.

“When we asked producers to look one-year ahead, more people replied saying they expect to be better off financially a year from now than they are today,” Mintert says. “The one thing that we were able to point to is people feel a little better about the interest rate environment.”

Ag Interest Rate Outlook Shifts

April's barometer found 34% of survey respondents say they expect the U.S. prime rate to remain unchanged or possibly decline in the next year, which is up from 25% in February.

Mintert expected this shift, however, due to the banking crisis in the early months of 2023. He points to another outlier at play in April's barometer.

At the time when the study was conducted, Mintert says commodity prices were stronger than they are today. With this in mind, he anticipates a downturn in farmer sentiment in the April barometer.

Short-Term Farmland Value Expectations in April

Interest rate sentiments have spilledover into short-term farmland value expectation’s 10-point uptick in April, according to Mintert.  

“This part of the survey focuses on what people think will happen in the next 12 months. A raise from 113 to 123 drives home the point that producers are feeling a little better about their financial situation, but a chunk of that increase is being driven by interest rates.”

While 123 is considered a high score for short-term farmland values, it ranks lower than past years’ April scores. In 2022, the number hit 144 but reached 159 in 2021.

Other survey areas, like equipment purchases, didn’t see hardly any change.

Farm Capital Investments Go Almost Unchanged

“The farm capital investment index was almost unchanged this month at 43 versus 42. That is a little bit stronger than this time last year, when it was at 36,” Mintert says. “You go back two years ago, and it was at 75.”

These capital investment numbers are a big change from three years ago, when the all-time peak for that index was above 90.

But Mintert isn’t surprised by the responses. With roughly 70% of respondents saying they feel it’s a bad time to make the investment, he doesn’t think it will stop anyone from buying. He expects that trend to shift in 2023.

“My guess is the capital index will gradually increase over the next six months as interest rates float higher,” Mintert says. 

Farm Bill Outlook

The next six months will not only see change in interest rates, but new policy moves in preparation for the 2023 farm bill. 

In Purdue’s farm bill portion of the barometer, only 40% of respondents feel there’s a “somewhat likely” chance the farm bill will be passed this year.

Here’s what those respondents said they’re keeping the closest watch on in farm bill debates:

•    Crop Insurance—40%
•    Commodity Programs—31%
•    Conservation—13%
•    Energy—8%
•    Research and extension—8%

“The title interest that surprised me the most was energy,” says Mintert. “I thought there’d be a little more interest on that, but apparently they’re more focused on commodity programs than renewable energy.”

At least half of respondents interested in renewable energy—particularly those who have been approached about solar in the past 6 months—say they’ve received offers of $1000 per ac. or more. And 25% said they were offered over $1250 per ac.

According to Mintert, these solar rates are the highest his team has seen in their survey findings to date.