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U.S. Farmers Lose Confidence In Ag Economy, Ag Barometer Shows

The Ag Barometer dropped 7 points in February.

U.S. farmers have a less optimistic sentiment about the current economic conditions and crop prices than they did to start the year, according to The Purdue University/CME Group Ag Economy Barometer.

In February, the barometer, which is based on a survey of 400 U.S. agricultural producers, declined 7 points to a reading of 136, down from 143 in January.

“Weaker expectations for the future and, especially, a decline in producers’ perception of current conditions combined to drive the barometer lower,” Jim Mintert, director, Center for Commercial Agriculture Purdue University, stated in a press release.

The Index of Current Conditions saw the biggest drop, down from 132 to 119, whereas the Index of Future Expectations weakened slightly, down from 148 to 145, according to the press release.

“Last month, the survey reflected a significant boost in optimism among agricultural producers after the announcement of the second round of MFP payments; however, it appears that their positive impact eroded quickly. Compared with responses from a year ago, fewer farms said they expect their operation to grow in the future, which could be a sign of increasing financial stress. The survey showed more farms are concerned about marketing risk, ranking it as the biggest risk facing their farming operations,” stated Mintert.

Mintert added, “Last summer, the tariff battle disrupted commodity markets and, as a result, producers’ perspective on whether now is a ‘good’ time or a ‘bad’ time to make large farm investments has been quite volatile. From January 2018 through June 2018, before the trade disruptions emerged as a major market factor, the Large Farm Investment index averaged a reading of 65. However, since that time, the index has had an average reading of 53 points and in February 2019 the index fell to a reading of 50, down 12 points from January, as uncertainty about commodity prices continues to make farmers wary of making large investments in their operations.”

Also, the Ag Economy Barometer asked producers whether they have plans to grow or increase the size of their current operation in 2019.

“50% of respondents said that they either “have no plans to grow” or “plan to reduce in size,” compared to 39% in 2018. Some farms in the no-growth category could have limited growth opportunities because they are under financial stress,” Mintert stated in the press release.

Last month, when 25% of farmers surveyed indicated they expected to take out a larger operating loan in 2018 vs. 2019, a follow-up question found that 27% of those farms were taking out larger loans due to unpaid operating debt carryover, suggesting they were experiencing financial stress, Mintert says.

Long term, farmers seem more optimistic about their industry, according to the Ag Barometer.

In February, when asked what type of risk was most critical to their farming operation, producers overwhelmingly chose marketing risk (56%) over both financial (27%) and production (17%) risk, which is consistent with their uncertainty regarding the commodity price outlook, Mintert noted in the press release.

More details are available in the full report, available on the Ag Economy Barometer website at purdue.edu/agbarometer.

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