Ag Economy Barometer: Farmers concerned about potential changes to tax policy

WEST LAFAYETTE, Ind. — A survey of 400 U.S. farmers showed concerns about potential changes to U.S. tax policy.

Ninety-five percent of respondents are either somewhat or very concerned that changes in tax policy will make it more difficult to pass their farms on to the next generation, according to the Purdue University/CME Group Ag Economy Barometer.

Key Findings

• 87% of producers expect capital gains tax rates to rise.

• 75% are very concerned about a possible loss of step-up in cost basis for farmland in inherited estates.

• 68% of farmers are very concerned about a possible reduction in the estate tax exemption for inherited estates.

The barometer also showed that farmers are more optimistic about the future of the ag economy, but less optimistic about current conditions.

“The Ag Economy Barometer was virtually unchanged in April versus March, just up 1 point compared to a month earlier,” said James Mintert, director of the Center for Commercial Agriculture at Purdue.

“However if you look under the hood, the Index of Current Conditions did decline 7 points this month, while the Index of Future Expectations actually rose 5 points.”

The Farm Financial Performance Index hit a record high in April, up 13 points from March. The reading was 83 points higher than one year ago.

Fifty percent of producers indicated that they expect better financial performance in 2021 compared to 2020, up from 39% who felt that way in March.

Strength in commodity prices continues to drive improving expectations for strong financial performance, even as many producers face rising input costs, according to the report.

“When we asked people whether or not now was a good time to make large investments in things like buildings or farm equipment, the responses were not as positive as readings we’ve seen the past few months,” Mintert said.

Farmers remain bullish about farmland values in the near term. They were less optimistic about the five-year outlook for farmland values.

Read the full Ag Economy Barometer report at purdue.ag/agbarometer.