Farmers flocking to solar for investments in renewable energy.

By Oliver Townsend Jun 4, 2024
Farmers showing increased interest in solar investment.jpegOrginal image from: https://solarbuildermag.com/projects/farmers-showing-increased-interest-in-solar-investment/

U.S. farmers are increasingly showing interest in leasing their land for solar energy production, according to recent findings from the Purdue University/CME Group Ag Economy Barometer index. This growing trend is not only boosting interest in clean energy but also impacting farmland values positively. The survey conducted in May revealed a significant rise in farmers discussing leasing farmland for solar energy production compared to previous months. The survey showed that about 20% of respondents in April and May explored leasing options, up from just 12% in March. Moreover, over half of the respondents received long-term lease rates exceeding $1,000 per acre, with 27% receiving offers surpassing $1,250 per acre. The data from April and May surveys indicated that approximately 30% of respondents have now signed solar energy leases for farmland they control.

Impacts on Farmland Values

In terms of farmland values, the survey revealed that producers’ views remained steady in May, with a slight increase in the Short-Term Farmland Value Expectations Index. However, compared to the sentiment in 2023, the 2024 outlook has weakened. The average index from January to May was down by 6% compared to the average in October-December 2023. The optimism among those expecting higher farmland values in the coming year is driven by factors such as nonfarm investor demand and inflation. Notably, energy production from wind and solar installations has been cited as a reason for the expected rise in values.

Shift in Energy Production Impact

James Mintert, the principal investigator of the Purdue University/CME Group Ag Economy Barometer, highlighted the evolving landscape of energy production as a factor influencing producers’ views on farmland values. Mintert emphasized the shift in alternative revenue sources impacting farmland value expectations and the increasing interest in Carbon Capture and Storage (CCS) projects among ethanol plants. The rising interest in CCS projects is partly fueled by tax credits in the Inflation Reduction Act, with some farmers already being approached about potential CCS projects with payment rates ranging significantly.

Farmer Sentiment and Financial Outlook

In May, the overall outlook of U.S. farmers improved, as reflected in the rise of the Purdue University/CME Group Ag Economy Barometer index. Both the Index of Future Expectations and the Current Conditions Index saw increases, with crop prices playing a significant role in boosting farmer sentiment. The rise in corn and soybean prices, coupled with progress in planting activities, contributed to the positive outlook. Despite the improvement, the Farm Financial Performance Index rose slightly, indicating that producers still anticipate financial challenges in 2024 compared to the previous year.

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