Farmer sentiment remained low in August as net farm income and crop prices are forecast to decline for the year.
Farmer sentiment fell in August despite better-than-expected income projections as crop producers continue to feel more pressure than livestock producers, Michael Langemeier, associate director at the Center for Commercial Agriculture at Purdue University, which released the Ag Economy Barometer index Sept. 3, told Equipment Finance News.
“The crop sector, which probably is more heavily emphasized on the Ag Economy Barometer, is not doing very well, but the livestock sector is doing very well, so for a machinery equipment dealer that makes a lot of difference,” Langemeier said.
“They’re not going to be selling very much equipment to crop producers this fall and into 2025, but livestock producers, they don’t buy as much equipment, but they do buy equipment, and they’re in the market for buying equipment because 2024 looks like it’s going to be a good year for beef and dairy producers.”
Sixty-one percent of farmers expect farm machinery purchases to decline next year compared to a year ago, compared with 58% in July, according to the Center for Commercial Agriculture. Only 5% of farmers expect more purchases, down compared with 7% in July.
Net farm income lower for crops
Net farm income is projected to decline to $140 billion for the year, down 4.4% year over year, not including adjustments for inflation, according to Sept. 5 forecast released by the U.S. Department of Agriculture (USDA). That represents an improvement over February’s projection of a 26% decline to $116.1 billion.
Farm cash receipts are forecast to decline 1.9% YoY to $516.5 billion in 2024, while total crop receipts are forecast to decline 10% to $249 billion due to lower receipts for corn and soybeans, according to the USDA. Total animal and animal product receipts are forecast to rise by 7.1% to $267.4 billion in 2024 due to rising eggs, cattle/calves, milk, and broilers receipts.
Farm Financial Performance Index hits 4-year low
Farm financial performance hit a four-year low of 72, down 9 points month over month and 14 points YoY, according to the Center for Commercial Agriculture. Low net cash flows and high interest rates continue to keep farm financial performance low, Langemeier said.
“The only things really negative right now are the low net cash flow and the high interest rates, so the only way that we’re really going to bust out of that cycle on the low side is if we change both of those,” he said. “If interest rates moderate, and they have to moderate more than 1%, and we see signals of higher net cash flow, which we’re not seeing, but if we did see those signals, then we’d bust out of that low range.”
The Farm Capital Investment Index tied the lowest point in its eight-year history to 31, down 7 points MoM and 6 points YoY, according to the Center for Commercial Agriculture. While the index hit a new low, over the year, it mostly moved sideways, Langemeier said.
The index “hasn’t been very high all year, but it really hasn’t moved,” he said.
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