Farmer sentiment improved in June for the second month in a row following sharp declines in March and April, according to the Purdue University/CME Group Ag Economy Barometer, which is based on survey responses from 400 U.S. agricultural producers. The index was up 14 points from May to a reading of 117.
Agricultural producers were more optimistic about both their current and future farming operations compared to a month earlier. The Index of Current Conditions rose 19% from May to a reading of 99, and the Index of Future Expectations climbed 12% from May to a reading of 126.
Over the last two months, farmers' perspective regarding making large investments in their farming operations improved markedly. The Farm Capital Investment Index recovered to a reading of 60 in June, compared to 50 a month earlier and just 38 in April. Although much improved since bottoming out in April, the recovery still left the Farm Capital Investment Index 12 points below the 2020 high established in February, before coronavirus affected markets.
James Mintert, the barometer's principal investigator and director of Purdue University's Center for Commercial Agriculture, noted that the June survey was conducted after the U.S. Department of Agriculture announced details of the Coronavirus Food Assistance Program (CFAP). "A more favorable spring planting season, combined with assistance from CFAP, helps explain this month's improvement in farmer sentiment, yet a majority of producers believe additional economic assistance will be needed in 2020," he said.
Survey results showed that farmers were less pessimistic about the financial performance of their operations in June than in April and May. However, they were noticeably more negative than in early spring of 2019. In June, 42% of farmers said they expected their farm’s financial performance to be worse than last year. This was down from 55% and 54% from April and May, respectively, but still noticeably worse than in April 2019, when just 27% expected a worse financial performance for their farm than a year earlier. Importantly, the percentage of farmers who expect their farm’s financial performance to improve compared to 2019 was virtually unchanged at just 12%.
When asked about the impact of COVID-19 on their farms' profitability, 64% of respondents indicated that they were "very worried" or "fairly worried" -- down from 71% in May. The June survey provided the first opportunity to survey farmers after details about CFAP were made available. Sixty percent of surveyed farmers indicated that CFAP "somewhat" (53%) or "completely" (7%) relieved their concerns about the impact of the virus on their 2020 farm income, while 26% responded "not at all." However, 64% of farmers indicated that they think it will be necessary for Congress to pass another bill to provide more economic assistance to U.S. farmers.
When asked about their short-run outlook for land values, farmers' perspective improved over the last two months. Respondents expecting land values to decline over the next 12 months came in at 21% in June, down from 29% in May and 35% in April. The shift in perspective was even more pronounced when farmers were asked about land values in five years, with 55% expecting farmland values to rise over the next five years, up from 40% in May. Meanwhile, just 17% of farmers surveyed who rent farmland said they expect to ask their landlords to lower their cash rental payments in 2021 as a result of COVID-19, down from 27% who planned to do so in May.
The June barometer also briefly touched on the ethanol industry due to the ethanol plant shutdowns and slowdowns in response to poor operating margins. Survey results showed that a large majority of farmers (73%) still expressed concern about the ethanol industry’s future viability, although this was down somewhat from 81% in May.