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Farmers Regain Confidence in Economy, Survey Shows

Trump’s aid package for tariffs helped improve sentiment.

The Ag Economy Barometer shows that farmers’ optimism improved in August, but remains below spring readings in May and June.

In August, the barometer that reads farmer sentiment jumped up 12 points to a reading of 129 after falling to 117 in July.

The shift in producer sentiment occurred primarily because producers’ perception of current conditions improved, according to Purdue University press release Tuesday.

The Index of Current Conditions increased to a reading of 121 following a dip to 99 in July. The Index of Future Expectations also rose in August but the increase was modest, rising to 132 just 6 points above its July reading, the press release stated.
 
“The shift in producer sentiment occurred against a backdrop of USDA announcing intentions to aid farmers impacted by importing countries’ imposition of tariffs on a multitude of U.S. ag products. Survey responses were gathered from agricultural producers in mid-August, after USDA outlined the assistance package in general terms, but prior to USDA’s August 27 announcement providing details regarding the way payments would be allocated among producers of affected commodities,” says Jim Mintert, director, Center for Commercial Agriculture Purdue University.

Regarding the Trump administration’s relief package, the survey asked producers “To what degree does President Trump’s $12 billion relief plan for U.S. farmers relieve your concerns about the impact of tariffs on your farm’s income?” Choices provided to respondents were 1) Completely; 2) Somewhat; 3) Not at all; and 4) Uncertain. Right at 90% of the responses were either “Not at all” or “Somewhat.”

According to the Purdue press release, producers were less pessimistic about the direction of the U.S. ag economy in the year ahead in August than they were in July. “In August, 22% of respondents said they expected good times in agriculture in the year ahead, up modestly from 19% in July. The bigger change from July was among those expecting bad times in U.S. agriculture, which declined from 61% in July to 52% in August,” Mintert says.
 
Farm Operation Investments

The survey also measured a shifting perspective, on the part of producers, on the U.S. ag economy as it relates to making large investments in their farming operation.

“In August, 26% of respondents said now is a good time to make large investments, up from 20% in July and unchanged from their response to this question back in June. Correspondingly, the percentage of producers that felt now is a bad time to make large investments fell by 8 points to 65% in August compared with 73% in July,” says Mintert.

Little Improvement in Farmland Price Outlook
Farmers don’t see farmland prices dropping, but also more farmers believe that land prices are not going higher, according to the August Ag Barometer.

“When asked for their perspective about farmland values five years from now, the percentage of producers expecting higher prices declined from 47% in July to 42% in August. However, the percentage of respondents expecting lower prices also declined, falling 3 points to 14%,” he says.
 
Producers Think a Trade War Impacting Ag Exports Less Likely
“U.S. ag producers are still concerned about a trade war, but they were somewhat less concerned in August than they were in July. In August, 51% of respondents thought a trade war was likely to reduce U.S. ag exports, down from 54% in July.  And the percentage that thought a trade war was unlikely increased to 28% in August compared to 23% who felt that way in July,” says Mintert.
 
The percentage of producers who feel trade conflicts will reduce their farm’s net income, 71%, was virtually unchanged in August from July.

However, among those expecting an income loss, the percentage income reduction they expect likely shifted from July to August. In July, 35% of respondents expecting an income decline said they believed an income reduction of more than 20% was likely.

In August, that percentage fell to 26% of respondents. Combining the percentage of respondents expecting 1) an income decline of up to 10% and 2) those expecting a reduction of 10% to 20% indicates that, overall, producers’ concern about a trade conflict-related income decline moderated from July to August. In July, 65% of respondents who expected an income decline thought the income loss would range up to 20%.

In August, 74% of those expecting an income decline put it in the range of 0% to 20%, indicating that producers previously expecting an income decline of more than 20% had scaled that back somewhat.
 
Pricing of 2018 Soybean Crop
The survey asked farmers how many have sold this year’s soybean crop prior to June 1, 2018.

“June 1 was chosen because November soybean futures reached their spring peak in late May and then declined sharply during June as the trade conflict unfolded and as 2018 yield prospects improved,” Mintert stated in the press release.

Nearly two-thirds (64%) of this month’s survey respondents said they planted soybeans this year. About 89% of respondents answered.

“However, among those who did respond, 25% of them said they priced more than 40% of their 2018 crop prior to June 1, and 27% said they priced 20% to less than 40% of their 2018 soybean crop. Nearly half (48%) of respondents said they priced less than 20% of their anticipated 2018 soybean production,” says Mintert.

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