The February Purdue University/CME Group Ag Economy Barometer reading reached 111, marking a five-point rise from last month. The small uptick is attributed to producers expressing increased optimism about the future, with the Future Expectations Index climbing seven points to 115. However, the Current Conditions Index remained unchanged. Despite their improved outlook for the future, farmers’ financial performance expectations did not keep pace. February’s Farm Financial Performance Index registered at 85, a slight dip from January and notably lower than its recent peak in December. The February survey was conducted Feb. 12-16.

Weak crop prices continue to weigh heavily on financial expectations, with mid-February Eastern Corn Belt cash prices for corn and soybeans declining by 7 percent and 8 percent, respectively, compared to two months earlier. When producers were asked about their primary concerns for farm operations in the upcoming year, the top concern cited by 34 percent of respondents was “high input costs,” closely followed by “lower crop/livestock prices,” chosen by 28 percent of respondents. Worries about rising interest rates among producers seem to have diminished somewhat, with 18 percent of February respondents citing it as a top concern, down from 26 percent who did so in November.

The Farm Capital Investment Index remains weak at 34 points, nine points lower than last year. Producers expressing reluctance toward making large investments highlighted concerns over high production costs and weak output prices. The percentage of farmers worried about farm profitability has tripled since last October. This month, 22 out of every 100 farmers pointed to farm profitability concerns, while last fall only 7 out of every 100 farmers felt the same way.

The Short-Term Farmland Values Expectations Index held steady in comparison to January but declined by four points from a year ago and by 30 points from two years ago. Although the farmland index remains positive, it is clear that overall sentiment regarding future increases in farmland values is weaker than it was a couple of years ago. Among producers who expect values to increase in the next year, the top reason cited for their optimism was demand from non-farm investors.

Each February, the barometer survey asks producers about growth plans for their farm operation in the upcoming  five years. This year, nearly four out of 10 respondents expressed no plans for growth, with another 14 percent saying they plan to exit or retire. On the other hand, just over three out of 10 respondents expect their farm’s annual growth rate will exceed 5 percent. Responses to this question, which have been consistent in recent years, point to further consolidation among farm operations. To put growth rates into perspective, consider that a farm operation growing at a 5 percent annual rate will double in size in about 14 years, whereas a farm growing at an annual rate of 10 percent will need just seven years to double.

Interest in leasing farmland for solar energy development remains strong, with 10 percent of respondents having discussed such projects in the last six months. Farmland lease rates for solar energy production varied widely, but over half of the respondents reported being offered lease rates of $1,000 per acre or more. The top end for solar lease rates appears to be rising over time. When this question was posed in June 2021, just 27 percent of respondents reported a lease rate offer of $1,000 or more per acre, compared to 56 percent of respondents this year.