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Source: Purdue University news release

To view the complete report, click here.

Figure 1. Purdue/CME Group Ag Economy Barometer, October 2015-December 2020.

Farmer sentiment improved modestly in December as the Ag Economy Barometer rose to a reading of 174, up 7 points from November. December's sentiment improvement still left the barometer 9 points lower than in October. Both of the barometer's sub-indices, the Index of Current Conditions and the Index of Future Expectations, were higher in December than in November although the current conditions improvement was three-times the size of the future expectations increase.

The Index of Current Conditions climbed 15 points to 202 whereas the Index of Future Expectations increased by just 5 points to a reading of 161. The farm income boost provided by the ongoing rally in crop prices appears to be the driving force behind the improvement in the Current Conditions Index and the overall improvement in farmer sentiment. The Ag Economy Barometer is calculated each month from 400 U.S. agricultural producers' responses to a telephone survey. This month's survey was conducted from December 7-11, 2020.

Figure 2. Indices of Current Conditions and Future Expectations, October 2015-December 2020.

Producers were noticeably more inclined to think now is a good time to make large investments in their farming operations than in November. The Farm Capital Investment Index increased 13 points in December to a record high 93. The comparison is even more dramatic when December's reading is compared to earlier in the year.

December's investment index reading was 28 points higher than back in August, when the crop price rally was just getting underway in earnest, and it is more than double the April reading of 38. When asked more specifically about their plans for farm machinery purchases, the percentage of farmers expecting to increase their machinery purchases in the upcoming year rose 5 points to 15 percent in December, while the percentage expecting to reduce their purchases declined by the same amount.

Figure 3. Farm Capital Investment Index, October 2015-December 2020.

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