Farmer Optimism about the Future Rising Despite Worries about Possible Tax Changes

Posted on Tue, 05/04/2021 - 15:27

Purdue University and CME Group’s Ag Economy Barometer edged a point higher from March’s already elevated reading, climbing to 178. The related report notes producers are becoming increasingly optimistic about the future, with the index of future expectations climbing another five points to 169. In contrast, the index for current expectations fell seven points to a reading of 195 for April.

Half of those surveyed indicated they expect a better financial performance in 2021 compared with 2020, which was an 11-point jump from March. “Strength in commodity prices continues to drive improving expectations for strong financial performance, even as many producers face rising input costs,” the related summary said.

Farmers were less inclined to think now is a good time for large investments in buildings, but more producers did signal intentions to boost farm machinery purchases compared with March. That signals the former response may have been more reflective of rising building costs and difficulty scheduling construction projects. Farmers expect farmland values to continue climbing.

Also of note, potential changes to tax policy are very much on producers’ minds. The April survey showed 95% of respondents are either somewhat or very concerned about changes in tax policy under the Biden administration that will make it more difficult to pass their farms on to the next generation. A hefty 87% expect capital gains rates to rise over the next five years. And 75% of those surveyed said they are “very concerned” about the possible elimination of step-up in cost basis for farmland and inherited estates. Sixty-eight percent of respondents indicated they are “very concerned” about a possible reduction in the estate tax exemption.

Just over 70% of respondents said they are more likely to attend an in-person ag event this year, while 28% to 35% said they were less likely to attend in-person events. Vaccination intentions of farmers mirror those of the general public.