Farmer sentiment took a downturn at the start of 2024 as the January Purdue University-CME Group Ag Economy Barometer Index fell to a reading of 106, 8 points below a month earlier. Compared to year-end, producers had a more negative outlook of their farms’ current situation along with a weakened outlook for the future as the Current Conditions Index fell 9 points and the Future Expectations Index dropped 7 points, both compared to December. Anticipated lower farm income in 2024 significantly influenced the decline across all indices, evident in the Farm Financial Performance Index registering at 85, which was 12 points lower than a month earlier. The January Ag Economy Barometer survey was conducted from January 15-19, 2024.
After strengthening during the last half of 2023, the Farm Financial Performance Index recorded its weakest reading since May 2023. The 7-point decline from December to January was primarily driven by a shift in expectations, moving away from anticipating income to remain steady in the upcoming year as it was in 2023, towards expecting income to weaken. The percentage of producers expecting weaker financial performance rose from 20% in December to 31% in January, while those expecting incomes to be about the same fell from 63% to 53%. In a related question, producers expressed two key reasons for farm financial performance to weaken in the year ahead. More producers this month cited lower crop and/or livestock prices as top concerns than at any point since January of last year when the question about upcoming year concerns was first introduced in a barometer survey. For the first time, the percentage of producers choosing lower crop/livestock prices (28%) matched the percentage of producers who chose higher input costs. This alignment indicates that U.S. farmers are worried about a possible cost/price squeeze leading to lower farm incomes.
Unsurprisingly, given producers’ concern about farm incomes, the Farm Capital Investment Index fell to 35, 8 points lower than in December. Fewer producers who think now is a bad time to make large investments attributed rising interest rates as the reason this month, reversing a trend evident throughout much of 2023 when concerns about higher interest rates were increasing. This month more farmers pointed to high prices for machinery and construction as a reason to hold off on making investments. Among producers who think now is a good time for large investments, more producers this month pointed to their farms’ expansion opportunities while fewer farmers cited the increase in dealers’ farm machinery inventories as a reason to invest.