May Ag Economy Barometer Tumbles

The Purdue University/CME Group Ag Economy Barometer tumbled significantly in May, dropping 20 points to an index reading of 158. That marks the lowest point for the survey since September.

Producers were less optimistic about both the current conditions and the future of the agricultural economy. The potential for changing tax rules and rising input costs appeared to be top of mind for producers and were the primary causes for the barometer’s decline. 78% of respondents said they are very concerned that the changes in tax policy being considered will make passing their farm on to the next generation more difficult. Also, 83% of producers expect capital gains tax rates to rise over the next five years, and 71% are very concerned about the potential loss of the step-up in costs basis for inherited estates.

Producers expressed less optimism about their farm’s financial performance this month. The Farm Financial Performance Index declined to 126 from a record high of 138 in April. During May, more producers said they expected to reduce their machinery purchases and construction plans for the upcoming year. One place that farmers remain bullish is farmland values.

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