For the second month in a row, agricultural producer sentiment experienced a big decline, erasing all gains recorded following the November 2016 election and indicating weaker expectations for the future. That’s according to the Ag Economy Barometer, an index based on a survey of 400 agricultural producers each month by Purdue University and the CME Group.
The barometer declined 14 points in mid-May to a reading of 101, down from 115 in April. But the results were captured as producers struggled with a soggy planting season and before the Trump administration announced plans to make a second round of market facilitation program payments.
"Ag producers are telling us the agricultural economy weakened considerably this spring as the barometer has fallen 42 points (29%) since the start of this year," said James Mintert, director of Purdue University's Center for Commercial Agriculture. "Farmers are facing tough decisions in the midst of a wet planting season and a lot of uncertainty surrounding trade discussions."
For the past three months, producers were asked whether they expect the soybean trade dispute with China to be resolved by July 1 and whether they feel the resolution will benefit U.S. agriculture. When the question was first posed in March, 45% of respondents expected the dispute to be resolved by July 1; that number declined to 28% in April and fell to 20% in May.
Regarding whether they ultimately expect an outcome favorable to U.S. agriculture, 77% of the respondents said “yes” in March, which declined to 71% in April, and fell further to 65% in May.
Mintert says a majority of producers still expect a favorable outcome to the trade dispute with China, but that majority appears to be shrinking.
The decline in the barometer came about because producers' perspectives on both current and future economic conditions worsened considerably compared to a month earlier. The Index of Current Conditions fell to a reading of 84, down from 99, and the Index of Future Expectations fell to 108, down from 123.
The Large Farm Investment Index, which measures producers' attitudes toward making large investments in their farming operation, has ebbed and flowed over the past year, but since the beginning of 2019, the index has trended significantly lower.
In May, just 18% of farmers stated it was a "good time" to make large farm investments while 81% stated it was a "bad time," pushing the investment index down to a reading of 37. This is the lowest Large Farm Investment Index reading since the Ag Economy Barometer's October 2015 inception.
Farmers' optimism toward short- and long-term farmland values has also waned since the early part of 2019. For example, the percentage of farmers that expect farmland values to decline over the course of the upcoming year climbed from a low of 20% in February to 25% in March and most recently to 30% in May. Looking further ahead, in May just 39% of producers said they expect farmland values to rise over the next five years, compared to 48% that said they expected values to rise when surveyed back in March.
Read the full May Ag Economy Barometer report at https://purdue.ag/agbarometer.
For more news, go to: www.Agri-Pulse.com
