WEST LAFAYETTE, Ind. and
CHICAGO, June 1, 2021 /PRNewswire/ -- The
Purdue University/CME Group Ag Economy
Barometer saw a significant decline in May, down 20 points to a
reading of 158. This marks the lowest reading for the survey since
September of 2020. Producers were less optimistic about both
current conditions and the future of the agricultural economy. The
Index of Current Conditions dropped 17 points to a reading
of 178 and the Index of Future Expectations fell 20 points
to a reading of 149. 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 from
May 10-14, 2021.
"The potential for changing tax rules and rising input costs
appeared to be on producers minds this month and were the primary
drivers for the Ag Barometer's decline," said James Mintert, the barometer's principal
investigator and director of Purdue
University's Center for Commercial Agriculture.
Producers expressed less optimism about their farm's financial
performance this month. The Farm Financial Performance Index
declined to 126 from a record high 138 in April. Although May's
index was 12 points lower than a month earlier, it was still the
second highest reading since the financial performance question was
first posed in spring 2018 suggesting strong crop prices continue
to support farm incomes.
In May, more producers said they expect to reduce their
machinery purchases and construction plans in the next year. The
Farm Capital Investment Index declined 10 points in May to a
reading of 65. This month's survey included a new question focused
on producers' plans to construct new buildings or grain bins.
Fifty-nine percent of respondents said their construction plans for
the upcoming year are lower compared to a year ago and just 28%
said their construction plans were about the same as a year ago.
Mintert said, "rising construction costs are likely a contributing
factor to weaker construction plans."
Producers remain very concerned about possible changes to U.S.
tax policy. In a series of questions first posed last month, 78% of
survey respondents said they are very concerned that the changes in
tax policy being considered will make passing their farm on to the
next generation more difficult. Additionally, 83% of producers
expect capital gains tax rates to rise over the next five years;
71% are very concerned about a possible loss of the step-up in cost
basis for inherited estates; and 66% say they are very concerned
about a possible reduction in the estate tax exemption for
inherited estates.
After declining last month, the Long-Run Farmland Value
Expectations Index rose 10 points to a record high reading of
158, with two-thirds of producers in the survey saying they expect
farmland values to rise over the next five years. The Short-Run
Farmland Value Expectation Index remained near its all-time
high, falling just 2 points below the record high set in April of
this year.
Producers also remain bullish on cash rental rates. On the May
survey, producers who grow corn or soybeans were asked about their
expectations for cash rental rates in 2022. Two-thirds (65%) of the
corn/soybean growers in the survey expect next year's cash rental
rates in their home area to rise above 2021's. In a follow-up
question, producers who said they expect rental rates to rise were
asked by how much they expect them to rise in the next year. Over
40 percent (43%) of respondents said they expect 2022 cash rental
rates to rise by 10 percent or more and 39% said they expect cash
rental rates to rise from 5 to as much as 10 percent.
Producers' expectations for good versus bad times in U.S.
agriculture have undergone a marked shift. For example, in May just
27% of respondents said they expect good times in U.S. agriculture
during the next five years, the lowest reading in the survey's
history and down 12 points from a month earlier. One driver of this
shift appears to be the discrepancy between expectations for the
crops versus livestock sectors in the upcoming five years. This
month over half (54%) of respondents said they expect widespread
good times for the crops sector in the next five years whereas just
one-fourth (26%) of producers said they expect widespread good
times for the livestock sector.
"The difference in expectations for these two principal sectors
of the agricultural economy could help explain why producers appear
to be very bullish about farmland values and cash rental rates
while at the same time expressing less optimism about both current
conditions and future expectations for the agricultural economy
overall," said Mintert.
Read the full Ag Economy Barometer report at
https://purdue.ag/agbarometer. The site also offers additional
resources – such as past reports, charts and survey methodology –
and a form to sign up for monthly barometer email updates and
webinars.
Each month, the Purdue Center for Commercial Agriculture
provides a short video analysis of the barometer results, available
at https://purdue.ag/barometervideo, and for even more
information, check out the Purdue Commercial
AgCast podcast. It includes a detailed breakdown of each
month's barometer, in addition to a discussion of recent
agricultural news that impacts farmers. Available now
at https://purdue.ag/agcast.
The Ag Economy Barometer, Index of Current Conditions and Index
of Future Expectations are available on the Bloomberg Terminal
under the following ticker symbols: AGECBARO, AGECCURC and
AGECFTEX.
About the Purdue University
Center for Commercial Agriculture
The Center for Commercial
Agriculture was founded in 2011 to provide professional development
and educational programs for farmers. Housed within Purdue University's Department of Agricultural
Economics, the center's faculty and staff develop and execute
research and educational programs that address the different needs
of managing in today's business environment.
About CME Group
As the world's leading and most
diverse derivatives marketplace, CME Group (www.cmegroup.com)
enables clients to trade futures, options, cash and OTC markets,
optimize portfolios, and analyze data – empowering market
participants worldwide to efficiently manage risk and capture
opportunities. CME Group exchanges offer the widest range of global
benchmark products across all major asset classes based on interest
rates, equity indexes, foreign exchange, energy, agricultural
products, and metals. The company offers futures and options on
futures trading through the CME Globex® platform, fixed income
trading via BrokerTec and foreign exchange trading on the EBS
platform. In addition, it operates one of the world's leading
central counterparty clearing providers, CME Clearing. With a range
of pre- and post-trade products and services underpinning the
entire lifecycle of a trade, CME Group also offers optimization and
reconciliation services through TriOptima, and trade processing
services through Traiana.
CME Group, the Globe logo, CME, Chicago Mercantile Exchange,
Globex, and E-mini are trademarks of Chicago Mercantile Exchange
Inc. CBOT and Chicago Board
of Trade are trademarks of Board of Trade of the City of Chicago, Inc. NYMEX, New York
Mercantile Exchange and ClearPort are trademarks of New York
Mercantile Exchange, Inc. COMEX is a trademark of Commodity
Exchange, Inc. BrokerTec, EBS, TriOptima, and Traiana are
trademarks of BrokerTec Europe LTD, EBS Group LTD, TriOptima AB,
and Traiana, Inc., respectively. Dow Jones, Dow Jones
Industrial Average, S&P 500, and S&P are service and/or
trademarks of Dow Jones Trademark Holdings LLC, Standard &
Poor's Financial Services LLC and S&P/Dow Jones Indices LLC, as
the case may be, and have been licensed for use by Chicago
Mercantile Exchange Inc. All other trademarks are the property
of their respective owners.
Writer: Kami Goodwin,
765-494-6999, kami@purdue.edu
Source: James Mintert, 765-494-7004,
jmintert@purdue.edu
Related websites:
Purdue University Center for Commercial
Agriculture: http://purdue.edu/commercialag
CME Group: http://www.cmegroup.com/
Photo Caption: Ag Economy Barometer declines sharply;
producers remain bullish on farmland values. (Purdue/CME Group Ag
Economy Barometer/James
Mintert).
https://www.purdue.edu/uns/images/2021/ag-barometer521LO.jpg
CME-G
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SOURCE CME Group