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Farmers Are More Optimistic About Future vs. Current Economy

Sentiment reading remains well off its lows.

The health of the U.S. agricultural economy is slipping, according to U.S. farmers responding to a monthly index.

The CME Group and Purdue University have released their March results of the Ag Economy Barometer. It’s a nationwide measure of the health of the U.S. agricultural economy.

For the second month in a row, producer sentiment (with a 124-point reading) has dropped below the prior month’s level.

Recent weakness in the barometer – which is based on a monthly survey of 400 agricultural producers from across the U.S. – followed a sharp improvement in producer sentiment from November through January, according to the press release Tuesday.

Although producer sentiment fell in both February and March, producers remain more optimistic about the agricultural economy than during all but the last two months of 2016.

“This month’s decline in producer sentiment was driven by weaker expectations about the future as the Index of Future Expectations fell to 126 – 22 points lower than a month earlier. The release states that this was the second consecutive decline for the Index of Future Expectations, pushing it well below its January peak of 169.

“The decline in sentiment regarding the future stands in contrast to producers’ perspective on current economic conditions in agriculture. The Index of Current Conditions rose to a reading of 120 in March, 15 points higher than in February, reaching its highest level since December 2015,” according to the CME Group/Purdue University press release.

The Ag Barometer reads producer sentiment by looking at three separate time frames: the current situation, the expected situation 12 months from now, and expected conditions five years in the future.

The share of producers reporting that their farm is financially “worse off” compared to a year ago is falling.

As the percentage of producers reporting their farm is worse off declines, it indicates their financial condition improved over the last year.

“In August 2016, more than 80% of survey respondents felt their farms’ financial condition was worse than a year earlier. But this measure of farm financial conditions improved steadily since last summer, reaching 51% on the March 2017 survey, a 30-point improvement compared with last August,” says Jim Mintert, director of Purdue’s Center for Commercial Agriculture and principal investigator for the barometer.

The main drivers behind this improvement were record (or near-record) crop yields, relatively large government payments received in the fall, and crop prices that strengthened following completion of the fall harvest, according to the Ag Barometer report.

 

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