By SUSAN BLOWER
WEST LAFAYETTE, Ind. — Producers across the country are feeling much more optimistic than they were a year ago about the ag economy, in particular about the direction of commodity prices, according to the Purdue/CME Group Ag Economy Barometer.
In its July survey of 400 producers in
major commodity sectors nationwide, Purdue University’s and CME’s barometer noted a dramatic uptick in producer sentiment since last summer.
The survey showed an increase to 139, which is the highest level since January 2017 and second-highest since October 2015, when data collection began.
Last summer’s barometer values ranged from the mid-90s to the low 100s. July 2016 recorded producer sentiment at 112.
“It does suggest an improvement – from producers’ perspective – in the ag economy. People are clearly feeling better than this time last year,” said Jim Mintert, director of the Center for Commercial Agriculture at Purdue, during a webinar discussing the topic earlier this month.
David Widmar, senior research associate at Purdue, added the barometer only indicated an improvement, not that the economy is good. “We are not measuring profitability or income. We are measuring sentiment among producers,” he said. “It’s an improvement from a bleak and dire situation a year ago, when there was uncertainty of how large a crop we would have, with error on the large side.”
The Ag Economy Barometer is computed based on five survey questions each month, which are then broken down into an index of current conditions and an index of future conditions. The index of future conditions peaked at 169 in January following the presidential election, but fell since then, landing at 138 in July.
July’s current conditions index was a value of 142. “The index of current conditions has been a steady uptick since August. Compared to last summer, where we were in the 80s in current condition, the level of 140 indicates a significant movement in people’s sentiment amid still challenging conditions,” Mintert said.
When specifically asked whether their farm operation is better off from a year ago, however, only 14 percent of farmers said they are better off and 39 percent said they are worse off. In July 2016, the results were dismal: 3 percent said they were better off from a year ago, and 70 percent said they were worse off.
Producers expect higher commodity prices in the next 12 months for corn, soybeans and wheat. About 39 percent said they expect higher prices between now and July 2018, which is the highest percentage to answer affirmatively, to date. Cotton was the exception, as most believe prices will go down.
Livestock producers seemed less optimistic when surveyed in June. More than 30 percent expect higher prices for beef in the next year, while fewer than 25 percent expect milk and slaughter hog prices to increase.
About 45 percent of producers surveyed believe corn will exceed $4.25 per bushel for the December 2017 contracts. Last April that number was 28 percent, which indicates a rise in confidence. “This reflects concerns about the (current) crop andwhere it’s headed. In the Western Corn Belt it’s dry and in the Eastern Corn Belt, we are still dealing with wet conditions and replanted crops,” Mintert said.
About 37 percent believe November 2017 soybean futures could exceed $10.50 per bushel, a rise from last April’s survey showing 23 percent answering in the affirmative.
Mintert and Widmar compared producer expectations with ag economists’ views as recorded in a survey of the Agriculture and Applied Economics Assoc. Last summer AAEA members were even more negative than producers about the ag economy and its future, scoring 79 to producers’ index of 112.
Last month they were just under producer expectations at 130. Surveys of ag thought leaders, like bankers and policy advocates, also indicate an improved outlook on the ag economy, Widmar said. “Across three different groups – producers, ag economists and ag thought leaders – we are seeing an uptick from a year ago. We are in a much different place,” he said.
He noted the exception is in farmland. Half of ag economists believe farmland will continue to decline over the next 12 months, but most people believe it will rebound in the next five years.
The next webinar on the Ag Economy Barometer will be scheduled in the fall.