Optimism falls in Indiana’s ag sector

Indiana farming

The potential for changing estate tax rules and rising costs are among the suspected reasons for a drop in optimism in Indiana’s agriculture sector.

The Purdue University/CME Group Ag Economy Barometer fell 20 points in May to a reading of 158. It’s the index’s lowest reading for the survey since September 2020.

Producers were less optimistic about both current conditions and the future of the agricultural economy, Purdue researchers said. The Index of Current Conditions dropped 17 points to 178 and the Index of Future Expectations fell 20 points to 149.

Producers expressed less optimism about their farm’s financial performance in May. The Farm Financial Performance Index declined to 126 from a record high 138 in April. Although May’s index was 12 points lower than April, it was still the second highest reading since the financial performance question was first posed in spring 2018 suggesting strong crop prices continue to support farm incomes.

Producers’ expectations for good versus bad times in U.S. agriculture have undergone a marked shift over the last several months, Purdue researchers said. In May, 27% of respondents expected good times in U.S. agriculture during the next five years, the lowest reading in the survey’s history and down 12 points from April.

In May, more producers said they expect to reduce their machinery purchases and construction plans in for the year. The Farm Capital Investment Index declined 10 points in May to a reading of 65.

The percentage of producers who planned to reduce their farm machinery purchases in the upcoming year rose from 37% to 46% in May while the percentage of producers planning to increase their farm machinery purchases held steady at 14%.

The May survey included a new question focused on producers’ plans to construct new buildings or grain bins. Fifty-nine percent of respondents said their construction plans for the upcoming year are lower compared to a year ago and 28% said their construction plans were about the same as a year ago.

Rising construction costs are likely a contributing factor to producers’ weaker construction plans, Purdue researchers aid.

Producers remain concerned about possible changes to U.S. tax policy.

In a series of questions first posed last month, 78% of survey respondents said they are very concerned changes in tax policy being considered will make passing their farm on to the next generation more difficult. Additionally, 83% of producers expect capital gains tax rates to rise over the next five years; 71% are very concerned about a possible loss of the step-up in cost basis for inherited estates; and 66% say they are very concerned about a possible reduction in the sales tax exemption for inherited estates.

The Ag Economy Barometer is calculated each month from 400 U.S. agricultural producers’ responses to a telephone survey. The latest survey was conducted between May 10 and May 14.


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