The Purdue University/CME Group Ag Economy Barometer dipped 5 points to a reading of 125 in February. Farmers’ perspectives regarding both current conditions on their farms and expectations for the future also weakened.

“Increased concern over the risk of falling output prices, rising interest rates and uncertainty over the future growth of U.S. agricultural exports is weighing on producers’ minds,” says James Mintert, the barometer’s principal investigator and director of Purdue’s Center for Commercial Agriculture.

Farm finances

Producers’ expectations for their farms’ financial performance in 2023 compared to 2022 weakened in February. The Farm Financial Performance Index declined 7 points to a reading of 86.

Farmers continue to point to concerns about higher input costs (38% of respondents) as their biggest concern for the year ahead. Notably, in this month’s survey more producers said they are concerned about the risk of lower crop and/or livestock prices than just a few months ago.

Concerns about rising interest rates appear to be on an upswing as well. In February, 24% of respondents chose rising interest rates as a key concern, up from 22% in the last two months and up from just 14% who cited interest rates as a top concern last summer.

Ag exports

Agricultural exports have been a key source of growth for U.S. agriculture for decades. Beginning in 2019, the Ag Economy Barometer survey routinely included a question asking producers about their expectations for agricultural exports in the upcoming five years.

Since peaking in 2020, when just over 70% of respondents said they expected exports to increase in the upcoming five years, the percentage of farmers looking for exports to grow over time has drifted lower.

In February just 33% of survey respondents said they expect exports to increase, which leads Mintert to suggest that a lack of confidence in future agricultural export growth is contributing to weakened sentiment among producers.

Capital investments

Despite strong farm income, the February reading of the Farm Capital Investment Index changed little, rising 1 point to a reading of 43. This month 72% of producers said it is a “bad time” to make large investments in their farming operation, while just 15% reported it is a “good time” to make such investments.

Of those who said now is a “bad time” to make large investments, 45% of respondents said it was because of an increase in prices for farm machinery and new construction, while 27% of respondents said it was because of “rising interest rates.” The percentage of respondents focused on rising interest rates as a key reason has doubled since last July when this question was first included in a barometer survey.

Farm growth

Each February, the barometer survey includes a question focused on farm growth, asking respondents about the annual growth rate they expect for their farm over the next five years.

This year 49% of respondents said their farm either had “No plans to grow” (33%) or “Plan to exit or retire” (16%). Of those respondents who expect their farms to grow, 19% expect it to grow by “Less than 5% annually,” and 22% said they expect it to grow by “5% to 10% annually.”

Solar lease rates increase

Leasing of farmland for solar energy production is a hot topic in many parts of the U.S. In both the January and February 2023 surveys, just over 10% of respondents said they had discussed a solar lease with a company.

Of those who indicated they had been in discussions, nearly half (48%) of respondents said they were offered a lease rate above $1,000 per acre, up from a low of 27% and a high of 35% in previous surveys. This month’s survey findings suggest companies have started to increase lease rates they are willing to pay.

The Ag Economy Barometer is calculated each month from 400 U.S. agricultural producers’ responses to a telephone survey. This month’s survey was conducted February 13-17.

Source: Purdue University/CME Group