Optimism Falls In Farm Country, Ag Barometer Shows
U.S. farmers say they are getting more pessimistic on the ag economy and more optimistic on government support payments, according to the Ag Economy Barometer.
In August, the latest results available from the CME Group/Purdue University-backed survey, the Ag Barometer fell to a reading of 124, down 29 points compared with a month earlier and just slightly below the June reading of 126.
The barometer fell due to declines in both the Index of Current Conditions, which dropped 19 points below the previous month, and especially the Index of Future Expectations, which fell 34 points below its July reading, according to the CME Group/Purdue University press release Tuesday.
“This month’s nationwide survey of 400 U.S. agricultural producers for the Ag Economy Barometer was conducted from August 12 through August 20, 2019. Weaker sentiment was fueled in part by both crop and livestock price declines that took place during late July and early August. In particular, prices for corn and soybeans fell sharply as crop conditions improved and USDA released larger than expected crop production estimates on the August Crop Production report. Virtually all of this month’s survey responses were collected following USDA’s release of the August 12 Crop Production report,” the press release stated.
Farmers remain concerned about making capital investments in their farming operation and on their short-run farmland value outlook, the survey shows.
According to the Ag Barometer, The Farm Capital Investment Index (formerly known as the Large Farm Investment Index) fell to a reading of 56 in August, 21 points lower than a month earlier, above June (42) and May (37) of this year.
In the short-term, farmers see farmland values dropping.
“The percentage of respondents expecting farmland values to rise over the next 12 months declined from 21% in July to 12% in August and the percentage expecting lower farmland values in the upcoming year increased from 18% to 21%. Although farmers’ short-run outlook on farmland values weakened since the last Ag Economy Barometer survey, their longer run (five years ahead) perspective on farmland values changed little from a month earlier,” according to the CME Group/Purdue University press release.
In August, farmers indicated a slight uptick in their sentiment about the soybean trade dispute with China getting resolved.
The Ag Barometer shifted to 29% believing the trade war will get resolved vs. 22% a month earlier. And the percentage of producers who felt resolution soon was unlikely declined to 71% from 78% in July.
“We’ve also been monitoring whether or not farmers think the trade dispute will ultimately be resolved in a way that benefits U.S. agriculture. In March, over three-fourths (77%) of farmers in our survey expected a beneficial outcome to the trade dispute with that percentage subsequently declining to 65% in May before rebounding in July to 78%. Again, there was a modest sentiment shift in August as the percentage of farmers expecting a positive outcome for agriculture to the dispute slipped to 72% while the percentage who said they did not expect a favorable outcome for U.S. agriculture rose from 19% in July to 25%,” stated the economists at CME Group/Purdue University.
USDA announced the per-planted-acre payment rates by county for the 2019 Market Facilitation Program (MFP) in late July. Payments are to be made in three tranches with the first payment to be made this summer and subsequent payments to be made in late fall 2019 and early 2020, if deemed necessary by the USDA.
The Ag Barometer asked farmers to what degree does $16 billion in MFP payments to U.S. farmers relieve your concerns about the impact of tariffs on your 2019 farm income?
Secondly, the Ag Barometer took the farmers’ pulse on whether or not respondents expect USDA to provide payments to U.S. farmers for the 2020 crop year.
According to the press release, the August survey results showed that over two thirds (71%) of farmers feel that the 2019 MFP program will either completely or somewhat relieve their concerns about the impact of tariffs on 2019 farm income. However, nearly three out of 10 respondents said “not at all” in response to this question, indicating that they felt the MFP payments fell short of making up for income losses attributable to the ongoing tariff battles.
Also, 58% of farmers surveyed responded that they expect another MFP payment to be made to U.S. farmers for the 2020 crop year.