Farm income prospects weigh on farmer sentiment

"Weakness in the barometer and related indices provide a signal that farmers are concerned about the possibility of extended weakness in farm incomes, similar to what took place from 2015 to 2019," said James Mintert, the barometer's principal investigator and director of Purdue University's Center for Commercial Agriculture.

August's survey results indicate a shift among farmers' primary concerns, with 30% of respondents identifying lower commodity prices as their primary concern, compared to 33% who cited high input costs. Last year at this time, only 20% pointed to weak commodity prices as a top concern.

However, concerns about rising interest rates have lessened, with only 17% of farmers mentioning this issue, down from 24% last year. Looking ahead, 68% of respondents expect interest rates to decrease in the coming year, while just 19% anticipate an increase.

The Farm Financial Performance Index dropped 9 points from July's survey and 14 points from a year ago, reaching its lowest level since July 2020, when there was widespread uncertainty from COVID-related lockdowns. The decline in financial performance reflects ongoing concerns about weak financial conditions. In turn, weakening financial conditions led many farmers to say that now is not a good time to invest, resulting in the Farm Capital Investment Index falling 7 points to 31, matching its all-time low.

"Farmers have also become less optimistic about farmland values this summer than in recent years," said Mintert. "The percentage of farmers who think farmland values could decline within the upcoming year has been rising, which is consistent with the weak outlook for financial conditions. The weak capital investment index reading suggests farmers are going to pull back on capital expenditures."

Respondents' outlook on farmland values faded in August, with the Short-Term Farmland Value Expectations Index dropping 13 points to 105. This marks a 21-point decline from a year ago and a 41-point drop from three years ago, when the index was at its peak. The decrease is attributable to a rise in the percentage of producers expecting farmland values to decline over the next year, increasing from 13% in July to 24% in August. The Long-Term Farmland Value Index also fell, dropping 4 points to 142.

Despite concerns about weakening farm income, a majority of respondents expect farmland cash rental rates for the 2025 crop year to remain stable. According to this month's survey, 70% of U.S. crop farmers anticipate that rental rates will stay the same, while only 16% expect a decline in lease rates.