Trade war potential not dampening producer optimismTrade war potential not dampening producer optimism

Ag Economy Barometer shows U.S. farmers remain optimistic about 2025 despite trade uncertainty, thanks partly to higher prices.

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Purdue University

With President Donald Trump threatening, then announcing and then pausing the application of tariffs on the top U.S. trading partners, farmers are still optimistic about how 2025 will treat them. Farmer sentiment remained strong at the start of the new year, according to the latest Ag Economy Barometer, rising modestly from December to January.

The January 2025 Purdue University/CME Group Ag Economy Barometer rose five points from the previous month to a reading of 141, driven by a nine-point jump in the Current Conditions Index and a three-point rise in the Future Expectations Index.

The index is based on a survey of 400 agricultural producers on economic sentiment each month. This latest survey was conducted Jan. 13-17 and is authored by professor emeritus James Mintert and Michael Langemeier with the Purdue Center for Commercial Agriculture.

The improvement in sentiment was linked to higher crop prices between December and mid-January and fewer producers citing crop and livestock prices as a top concern. For instance, Eastern Corn Belt prices for near-term delivery of corn and soybeans rose by 9% and 5%, respectively, during that period. In addition, U.S. Department of Agriculture data showed higher prices for poultry, hogs, eggs and cattle over the past month as well as in the outlook for the year.

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While farmers' views of current conditions improved, optimism about the future remained even stronger, with the barometer’s Future Expectations Index exceeding the Current Conditions Index by 47 points.

The Farm Financial Performance Index climbed to 111 points in January. “That's up compared to 98 in December and well above where it was back in September when the reading was just 68,” Mintert said in a recap of the survey findings. This indicates that producers, on average, anticipate 2025 will be a more robust financial year than 2024.

“We asked producers what their expectations are with respect to their biggest concern for their farming operation in the upcoming year, and 39% of the respondents in this month's survey said higher input cost is their top concern, while 24% said lower crop and/or livestock prices,” Mintert said.

Trade policy still top-of-mind

Agricultural trade remains a top concern for U.S. farmers. In January, 42% of producers identified "trade policy" as the most important policy for their farm over the next five years, more than double the 17% who selected "crop insurance program."

While there is still significant concern among producers that a trade war could break out that harms U.S. agricultural exports, responses expressing worries about a potential trade war have eased slightly over the month. Forty percent of producers now believe a trade war is "likely" or "very likely," down from 48% in December, while those who see a trade war as "unlikely" or "very unlikely" rose from 21% in December to 29% in January.

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Land values, investments and loans

The Farm Capital Investment Index held steady at 48. Despite no change, this index remains significantly higher than last summer's low of 31 and represents the second-highest reading of the past three years, the report pointed out. Still, it’s uncertain if the optimism will lead to more investments in farm machinery or new construction.

The Short-Term Farmland Value Expectations Index rose five points in January to 115, stabilizing again after a dip in farmers' confidence in land values late last summer amid weaker crop prices. Meanwhile, the Long-Term Farmland Value Expectations Index, which gauges expectations for the next five years, declined five points to 150 but remains eight points above its 12-month low set last August.

Since 2020 the annual January barometer survey has included questions about operating loans for the upcoming year. “We asked producers about their expectations for the size of their farm operating loan in 2025 compared to 2024,” Mintert said in his recap, and this survey showed 18% of producers anticipate larger loans this year. “That compares to 15% who felt that way a year ago. We followed up with those who expect to have a larger operating loan and asked them why that was the case, and 23% of them said it was because they were carrying over unpaid operating debt from the prior year. That's up from 17% who felt that way a year ago and up from just 5% who felt that way two years ago.”

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The shift reflects a decline in farm income, particularly crop income, over the past two years and could be an early signal of rising financial stress among producers, the survey explained.

Interest in leasing farmland for solar energy production continues to grow. In January's survey, 11% of farmers reported discussing solar leases for their land within the last six months. Overall, 3% of survey respondents said either they or one of their landowners had signed a solar lease.

"The January survey reflects a notable sense of optimism among U.S. farmers, particularly regarding their expected financial performance in 2025," said Langemeier, the barometer's principal investigator and director of the Center for Commercial Agriculture. "Recent improvements in crop and livestock prices have provided a boost to farmers' current sentiment. Although farmers are optimistic about the future, there are some clouds on the horizon. For example, more farmers this month reported challenges in paying off operating loans compared to the last couple of years, and many producers are worried about the future of agricultural trade, with 40% of this month's respondents saying they think a trade war is either likely or very likely."

The Center for Commercial Agriculture, housed within Purdue's Department of Agricultural Economics, provides professional development and educational programs for farmers. Its faculty and staff develop and execute research and educational programs that address different needs of managing in today's business environment.

CME Group is the world's leading derivatives marketplace, enabling clients to trade futures, options, cash and OTC markets.

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