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U.S. Farmers Maintain Optimism for Ag Economy, Barometer Reports
The Purdue/CME Group’s June survey of 400 U.S. agricultural producers indicates producers feel their farm operations’ financial positions are stronger now than a year ago.
This shift in producers’ perspective is one reason the Ag Economy Barometer’s June reading of 131 was virtually unchanged from a month earlier. The Ag Economy Barometer, a producer-based sentiment index, has held steady for three months in a row and remains well above levels recorded prior to November 2016.
The shift in producers’ perspectives regarding their financial positions is part of a long-term trend, according to the Barometer’s results released last week. In June 2016, just 3% of survey respondents felt their operations were financially better off than a year earlier. That percentage increased to 10% last fall, then declined somewhat in early winter before rebounding to its current reading of 13%, the highest reading since we began surveying producers in October 2015.
A similar pattern emerges when examining the percentage of producers indicating their farms’ financial positions declined compared with 12 months prior. The percentage of farmers indicating that their financial positions were worse than a year earlier was 46% in June 2017, little changed from May’s 44%, but well below the 67% recorded as recently as February.
The shift in perspective compared with last summer is even more noticeable since 81% of respondents in August 2016 said their farm was financially worse off than the year before.
The long-term shift in producers’ attitudes about their operations’ financial conditions is likely reflective of several factors.
First, revenues on many farms increased as a result of record, or near-record crop yields in 2016. The revenue improvement was further supported by the fact that corn and soybean futures prices strengthened from late summer through early winter.
Second, production costs moderated for most crop operations compared with the prior year. Fertilizer prices in particular were weaker than a year earlier, helping to improve margins.
Third, as the long-term adjustment to tighter crop operating margins continues, farmland rental rates continue to adjust downward, helping to brighten the financial picture for many farm operations.
Looking Ahead to the Rest of 2017
In addition to the monthly questions measuring sentiment, the barometer survey also asks producers about the key drivers affecting their farms and the broad farm economy.
On the June survey, producers were asked to compare current expectations about their farm financial performance in 2017 to their initial budgets or plans.
Most producers (60%) indicated that current expectations are “about the same” as their initial expectations. However, for farm operations whose expectations changed, there was a turn toward “worse than” planned (28% was more common than “better than” budgeted (12%).
The number of respondents indicating they expect their 2017 financial performance will be worse than originally planned could be reflective of the difficulties some farms have experienced this spring with respect to planting and poor growing conditions, especially in the eastern Corn Belt.
Story Written by James Mintert, David Widmar, and Michael Langemeier, Purdue University economists