(The Center Square) – Farmers are expressing a little more confidence about the future, according to a report released recently by Purdue University, but they still have concerns about what lies ahead.
In July, the Purdue University-CME Group Ag Economy Barometer rose 2 points from June to 123. That rating is derived from a survey of 400 farmers polled by telephone from July 10-14 and is also 20 points higher than the index in July 2022.
Among the other findings, more producers said their farms were performing better financially compared to last year. Those who said their farms’ financial performance improved rose from 14% in May to 17% last month, while those claiming their farms’ financial performance declined from 38% to 30% over the same span.
In addition, 39% of farmers polled said they feared a downturn in the next five years. That’s compared to 41% who felt that way in June.
However, at the same time, more farmers, 31%, believe their farms would be worse financially this time next year than better, 21%.
Fears about interest rates were the main reason for that trepidation.
The July survey, conducted before the Federal Reserve increased the prime interest rate by .25%, found that 65% of farmers thought the rate would be higher in July 2024. That includes 33% who believe the rate may go up between 1% to 2%. While the percentage of farmers who feared higher rates was 76% in February, only 57% felt the same in June.
“If the Fed really is serious about bringing down inflation, that 1-to-2% category… could be more reasonable,” said James Mintert, the director of Purdue’s Center for Commercial Agriculture and the principal investigator for the barometer, on a podcast discussing the results.
Those higher rates are why more farmers are putting off making large investments. In July, 39% cited interest rates as their primary reason for the delay, compared to 29% who cited higher costs for machinery and construction. In June, 37% cited higher costs versus 35% who were concerned about rising interest rates.
Despite the concern over interest rates, the Farm Capital Investment Index rose in July to 45, up three points from June and 14 points from its low point last November, which Mintert described as “a big move” for the index.
“Normally, if you expect interest rates to go up, you would think that would create a somewhat unfavorable environment for investment, but our survey isn’t supporting that, at least so far,” Mintert said.
