Farmer sentiment reaches four-year best

Farmer sentiment in May climbed to its best level since May 2021 as the Purdue University-CME Group Ag Economy Barometer index reached 158, 10 points better than in April. Farmers were more optimistic about both current conditions and their expectations for the future. The Current Conditions Index improved by 5 points to 146 and the Future Expectations Index jumped 12 points to 164. Key reasons behind the sentiment improvement were a much-more-optimistic view of U.S. agricultural-export prospects, combined with a less-negative view of tariff impacts on 2025 farm income than respondents provided in either March or April. The May barometer survey took place May 12-16.

The Farm Financial Performance Index improved to 109 in May, 8 points better than in April. The index's improvement indicates U.S. farmers expect 2025 to be a somewhat-stronger income year than they experienced in 2024. But despite expectations for stronger financial performance in 2025, the Farm Capital Investment Index decreased 6 points from April to May, providing an index reading of 55. This month's decline was all attributable to fewer respondents saying it's a good time to invest in their farm operations. Even with the investment index's decline, it was still much stronger this year than in May of the past three years – when investment index readings ranged from 35 to 37. Since November 2024 the investment index has averaged a reading of 54, which is better than the 35-point average recorded from January through October 2024.

The Short-Term Farmland Value Expectations Index improved in May to a reading of 124, which was 14 points better than the April reading and the best reading since March 2024. The farmland index's improvement was primarily the result of more producers saying they expect values to increase; the index increased from 25 percent to 37 percent of respondents this month. Meanwhile fewer producers reported that they expect values to hold steady, which decreased from 60 percent of respondents in April to 50 percent in May.

One of the drivers behind this month's shift in farmer sentiment appeared to be a much-more-positive view of U.S. long-run agricultural-trade prospects. In May the percentage of producers who said they expect U.S. agricultural exports to increase during the next five years skyrocketed to 52 percent, an increase from 33 percent who responded that way just a month earlier. This was the best percentage of positive responses received to this question since November 2020. At the same time, the percentage of producers who said they expect exports to decline decreased to just 12 percent, a decrease from 24 percent who felt that way in April.

To learn more about U.S.-producer views regarding trade, the May survey repeated a question that was first posed in barometer surveys in the fall of 2020. Producers were asked if they "strongly disagree," "disagree," "agree" or "strongly agree" with the following statement – "Free trade benefits agriculture and most other American industries." In fall 2020 an average of 49 percent of respondents chose "strongly agree" with the free-trade statement. That stands in sharp contrast to the results from this month's survey, in which only 28 percent of respondents chose "strongly agree." Responses to a question previously posed in the barometer's March and April surveys provide additional evidence that producer views regarding trade have shifted. Producers were asked about the expected impact of the U.S. tariff policy on farm income in 2025. In March and April, 57 percent and 56 percent of respondents, respectively, said they expected tariffs to have a "negative" or "very negative" impact on their farm's income. In May the percentage decreased to 43 percent, while the percentage expecting "no impact" increased to 30 percent, compared to 19 percent and 22 percent in March and April, respectively.

To learn whether or not producers are facing difficulties in hiring adequate labor for their farm operations, the May survey included two questions related to farm labor. Fifty-one percent of respondents said they normally hire non-family members to work on their farms. A follow-up question was posed to that group to learn if they are having, or expect to have, difficulty hiring adequate labor as a result of the U.S. Administration's policy to reduce immigration. One out of four respondents who hire non-family members to work on their farms said they expect a "lot of difficulty" or "some difficulty" in hiring adequate labor. Keeping in mind that barometer surveys do not target specialty-crop producers who tend to hire more non-family labor, results suggest that reduced farm-labor availability could be a significant concern for some U.S. crop and livestock producers.

Wrapping Up

Farmer sentiment in May reached its best level since May 2021, as both farmer appraisal of current conditions and expectations for the future improved. Producers' more-optimistic view of U.S. agricultural-trade prospects, combined with an improved farm-income outlook, appeared to be the primary drivers behind the improvement in sentiment. In what could be an emerging issue, one out of four crop and livestock producers who typically hire non-family members said the U.S. Administration's policy to reduce immigration could increase their difficulty in hiring adequate labor for their farm operations.

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