Farmers are hopeful that tariffs will yield significant subsidies, outweighing short-term challenges, but equipment purchasing is expected to remain subdued in 2025.
Purdue University’s Ag Economy Barometer reached 148 in April, up from 140 in March, according to its May 6 report. For the index, roughly 400 farmers were surveyed between April 14 to April 21.
The Index of Future Expectations rose 8 points to 152, reflecting farmers’ beliefs that President Donald Trump’s administration will distribute substantial farm payments during the next several years to help offset tariff-related challenges, similar to Trump’s first term, Michael Langemeier, associate director at the Center for Commercial Agriculture at Purdue University, told Equipment Finance News.
“We asked the respondents whether they thought what’s going on with tariffs was going to have a negative or positive impact on net farm income, and over 50% said a negative impact,” he said. But when farmers were asked whether they expect to receive trade payments if the tariffs impact their income, farmers said they do.
Farm program payments, a subsidy based on acreage and crop yields, are projected to total $42.4 billion in 2025, up from about $9.3 billion last year, according to a Feb. 6 report by the U.S. Department of Agriculture. Farmers are also receiving funds stemming from the December continuation of the 2018 Farm Bill, although it’s unclear how much has been distributed, Langemeier said.
Equipment sales slump continues
Challenges that have faced farmers in recent years, including low commodity prices and high input costs, have contributed to lower equipment sales among dealers and OEMs.
For example, farm equipment manufacturer Agco reported a 30% year-over-year sales decline in the first quarter, partly because of such challenges, Chief Financial Officer Damon Audia said during the company’s Q1 earnings call.
“Despite net farm income forecast revising higher related to government aid, farmers are delaying equipment purchases due to still-elevated input costs and uncertain export demand causing tighter profit margins,” he said.
While equipment sales are expected to remain soft in 2025 amid tight cash flow, livestock and dairy farmers, who are generally faring better financially than crop producers, may be positioned to make large purchases this year, Langemeier said.
Purdue’s Farm Capital Investment Index rose 7 points in April to 61, and about 25% of the 400 respondents said it is a good time to invest, according to the report.
“My guess is that a chunk of those are livestock [farmers],” Langemeier said.
Farmers steady on loan payments
Another reason for lower equipment sales is that farmers are still paying on loans initiated several years ago, Langemeier said. And while farm profits are relatively low, they’re “still big enough to repay debt.”
“They’re just not big enough to repay debt and invest in capital assets,” he said. “Debt payment usually comes first because it has to. … And we have to remember that 2021 and ’22 were so good that the balance sheet is still relatively strong because of that.”
Langemeier said he expects most equipment purchases in 2025 to be driven by replacement demand and acquired with borrowed funds rather than operating funds.
Still, crop producers should be cautious about buying capital assets during times of economic uncertainty “because usually when you do that, it makes it more difficult to repay that debt if cash flow stays tight,” he said.
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