Farmers who reported stronger financial buffers were more confident about their businesses in October, according to a Purdue University analysis published Nov. 6. Yet even that group remained cautious about buying machinery and buildings, showing that greater capacity to withstand a setback did not necessarily translate into enthusiasm for new investment.
Purdue researchers Michael Langemeier and Joana Colussi analyzed responses from 400 participants in the October 2026 Purdue University-CME Group Ag Economy Barometer survey. They examined what they call absorption capacity: a farm’s ability to weather market shocks through financial reserves, diversified cash flows, lower fixed costs and balance-sheet strength.
The researchers grouped farmers using three self-assessments: whether their fixed costs per unit were low compared with competitors, whether their enterprise mix was more diversified than five years earlier, and whether their balance sheet was strong. These responses describe producers’ own assessments, not audited finances, and the relationship with confidence does not establish cause and effect.
Confidence differs, but investment caution persists
Each question carried a score from 1 to 5, producing totals from 3 to 15. The researchers classified scores of 9 or lower as low absorption capacity and scores of 10 or higher as high capacity. The average was 9.5, and the most common totals were 9, 10 and 11.
The overall sentiment index measured 107 for the lower-capacity group and 143 for the higher-capacity group, compared with 126 for all respondents. Farmers reporting stronger buffers also had more positive readings for current conditions and future expectations. These are national survey findings, not a California-specific measure of farm financial strength.
The investment results were more restrained. The Farm Capital Investment Index stood at 47 for the lower-capacity group and 63 for the higher-capacity group. Both were below 100, meaning more respondents considered it a bad time than a good time to make investments such as machinery or building purchases.
Expectations for financial performance showed another divide. The index measuring whether producers expected better or worse performance over the next 12 months was 87 among lower-capacity farms and 101 among higher-capacity farms. Across all respondents, it was 94. A reading below 100 indicates that expectations of deterioration outnumber expectations of improvement.
Balance sheets were the strongest of the three self-rated defenses. The average response to the strong-balance-sheet statement was about 3.5, above the neutral score of 3. Average responses for low fixed costs per unit and a more diversified enterprise mix were around neutral. A farm could therefore report strength in one area without scoring highly overall.
Reserves carry a tradeoff
The framework predates this survey. In an April 2023 article, Purdue researchers Margaret Lippsmeyer and Langemeier distinguished absorption capacity from agility, or the ability to recognize and act on market opportunities. Their framework treats the two as complementary: reserves help a business withstand disruption, while flexibility helps it respond to changing conditions.
That earlier work also identifies a tradeoff in carrying reserves. Cash, marketable commodities and unused borrowing capacity can provide room to maneuver, but holding resources in reserve has an opportunity cost when those resources could earn a return elsewhere. The authors describe a balancing problem, rather than a rule that larger reserves are always better.
Input costs remain a constraint
Costs remained a prominent concern in the October survey. More than half of respondents selected high input costs as the main factor limiting improvement in their farm’s financial situation. About 9% selected debt or financial pressure. Those answers identify producers’ leading concerns, rather than measuring the dollar burden of each expense.
Separate USDA figures provide earlier national price context. In its Oct. 30 release covering September 2026, the National Agricultural Statistics Service reported that the Prices Paid Index rose 0.4% from August and 5.2% from a year earlier. Higher prices for diesel, complete feeds, other services and concentrates outweighed declines in several other categories.
Meanwhile, USDA’s overall Prices Received Index fell 1.7% from August, although it remained 0.5% above September 2025. The crop index rose 3.7% for the month while the livestock index fell 4.4%. USDA notes that changes in the volume and mix of commodities marketed also influence these indexes, so the aggregate movements do not describe every farm’s experience.
