Ag Economy Barometer: What’s driving continued decline in producer sentiment? – AgriNews

WEST LAFAYETTE, Ind. — The Purdue University-CME Group Ag Economy Barometer declined from 121 in April to 119 in May, driven primarily by worsening views of current conditions on the farm.

“High input costs were once again the dominant concern in this month’s survey,” said Michael Langemeier, director of the Purdue Center for Commercial Agriculture.

“In fact, more than half of producers identified input costs as their biggest concern overall, while nearly half said those costs are the primary factor limiting improvement in their farm’s financial performance.”

The decline in May was largely tied to weaker perceptions of current conditions. The Current Conditions Index fell 8 points and now sits at its lowest level since December 2024.

Meanwhile, producers’ expectations for the future improved only slightly — just 1 point — and remain well below levels seen a year ago.

Only 14% of producers said their operation is financially better off today than it was a year ago. And, looking ahead to the next 12 months, just 22% of respondents expect their operation to improve financially.

Caution is also showing up in investment behavior. The Farm Capital Investment Index declined to 41 in May, its lowest level since September 2024.

This index measures producers’ willingness to make large investments, such as machinery, equipment, or buildings.

“A continued decline in this index signals increasing hesitation towards major capital purchases, likely reflecting tighter margins, elevated borrowing costs and ongoing uncertainty surrounding profitability,” Langemeier said.

Iran War

Questions related to the Iran conflict were included again in this month’s survey, particularly regarding its impact on input costs and profitability.

“Approximately two-thirds of producers expect the conflict to negatively impact their farm’s income in 2026,” Langemeier said. “And, remember, we have both crop and livestock producers in this survey.”

Among producers who planted corn in 2025, expectations for higher break-even prices remained widespread. About half of respondents expect corn break-even prices to increase up to 6%.

Seventeen percent expect increases between 6% and 9%, while nearly one-third expect break-even prices to rise by 10% or more.

Labor Shortages

The survey also revisited labor availability and the potential role of artificial intelligence tools on the farm.

Among producers who hire non-family labor, approximately 44% reported at least some difficulty hiring workers this year.

“Many respondents are skeptical regarding the immediate value of AI tools in addressing labor and equipment challenges,” Langemeier said.

Nearly 60% said AI would not improve their current situation, while roughly 40% believe it could help at least somewhat, with only 4% saying it could help a lot.

Land Values

Despite weakening sentiment and tighter margins, farmland value expectations actually improved in May. Both the short-term and long-term farmland value indices moved higher this month.

Producers identified interest rates, alternative investments and net farm income as the most important factors influencing land values.

Optimism regarding the broader direction of the U.S. economy continued to worsen. Fifty-two percent of respondents said the country is headed in the right direction, down from 57% in April and the lowest percentage recorded since this question was introduced last year.

“As we look ahead, the May survey highlights several important themes shaping the farm economy — continued pressure from high input costs, growing concern about margin compression, reduced willingness to make large capital investments, ongoing uncertainty tied to global geopolitical events and increasing caution regarding profitability,” Langemeier said.

“While producers remain relatively optimistic about farmland values and long-term agriculture fundamentals, concerns about costs and financial performance are continuing to weigh heavily on sentiment and management decisions.”

Read the full report at purdue.edu/agbarometer.