Farmer Confidence Surges, is Highest Since Trade War Began
With Trump tariff payments boosting Corn Belt farm revenue, farmer confidence shot to its highest level since last June, just before the trade war began against China, said the monthly Ag Economy Barometer published by Purdue University. Producers polled by Purdue said they expect ag exports to increase in the years ahead, an indirect sign they expect a beneficial resolution with China.
President Trump has set a March 1 deadline for a Sino-U.S. agreement or he will order a steep increase, to 25%, in tariffs on $200 billion worth of Chinese products. China retaliated against previous U.S. tariffs by setting high duties on U.S. goods, including farm exports. The most prominent ag target is soybeans. China used to buy 1 in 3 bushels of the U.S. crop. Sales have plummeted, although China said it would buy 5 million tonnes of the oilseed this month while bilateral negotiations are held.
Purdue said its ag barometer, a gauge of farmer sentiment, climbed 16 points in January, its first survey of producers since the administration announced a second round of Trump tariff payments, officially the Market Facilitation Program, and since the enactment of the 2018 farm law. “Both of [them] appear to have helped boost farmer sentiment,” said Purdue.
As of Monday, the USDA had sent $6.41 billion in cash to producers, with an additional $1.2 billion in payments possible from claims that were being processed. Nearly 805,000 applications have been submitted. February 14 is the deadline to apply. As expected, soybeans are the leading commodity for payments, and the top states for payments, Illinois and Iowa, are the premiere soybean producers.
For months, analysts have said Chinese leaders are well aware of the impact felt by farmers, a loyal Trump bloc, when it it buys or shuns U.S. soybeans.
“What’s going to happen with respect to trade negotiations continues to weigh heavily on U.S. farmers’ minds,” wrote Purdue economists James Mintert and Michael Langemeier in discussing the results of the survey. A larger portion of grain and livestock producers, 63%, believe ag exports will increase over the next five years than the 59% registered in the preceding poll. And more farmers believe they will be better off financially a year from now than did a month ago.
A large majority of U.S. growers are sticking with soybeans despite low market prices and lost sales due to the trade war, according to the Purdue survey. Two thirds say they will plant the same amount of soybeans as in 2018, and 8% say they will plant more.
One quarter say they will reduce their soybean plantings, roughly the same as the 30% who said in November that they would scale back. There may be a slight thaw in plans. In November, 69% of those planning a reduction said they would slash plantings by more than 10%; this time, 58% would reduce plantings by more 10%. The USDA has projected a 7% drop in soybean area this spring, to 82.5 million acres, while wheat and corn gain land.
In recent weeks, soybean prices have strengthened in comparison to corn, the most popular alternative crop. The price increases indicate widespread belief that a settlement will restart U.S. soybean exports, say analysts.
Without higher domestic or foreign demand, “Soybean acreage seems destined to be well above levels necessary to produce an average price in the mid-$9 range and meet the cost of production in Illinois,” said economist Todd Hobbs, of the University of Illinois on the farmdoc Daily blog.