‘Barometer’ measures farmers’ growing optimism

Jan Shepel
A national poll, gauging the sentiments of U.S. farmers, shows a dramatic improvement in their optimism, with polling numbers reaching record highs.

MADISON - A national poll, gauging the sentiments of U.S. farmers, shows a dramatic improvement in their optimism, with polling numbers reaching record highs.
            The Purdue-Chicago Mercantile Exchange (CME) Group’s “Ag Economy Barometer” showed that agricultural producers had a much improved outlook following the November election. The recent monthly update of that survey showed that that their optimism continues to soar.
            Their sentiments hit a record high for the second consecutive month, according to this survey. The “barometer” created by the survey, show a January number of 153 – a new record high for the survey, which was created in 2015. That was up substantially from December’s record-breaking 132.
            The survey noted that producer sentiment fell to 92 in October, just before the election and the January number marks the third straight month in the survey’s uptick.
            The barometric figure is a compilation of various readings, including “Index of Current Conditions,” which climbed in the January report from 102 to 118 in January; but the “Index of Future Expectations” is what drove the barometer with a 23-point increase from December to January.
            The barometer is based on a monthly survey of 400 U.S. agricultural producers and a new barometric number is released on the first Tuesday of each month. Purdue and the CME designed the barometer to create a tool for producers, economists, traders and financial industry professionals who are interested in the agricultural industry and the broader global economy.
            Analysts at Purdue’s Center for Commercial Agriculture noted that producers’ optimism may have been linked to improvements in prices for key commodities, including cattle, hogs and soybeans which improved during the fall.
            Cattle futures rose over 20 percent, lean hog futures rose more than 30 percent and Chicago Board of Trade futures for soybeans rose 10-plus percent from the fall, the survey’s economists noted.
            This improvement in outlook comes despite a majority of the producers – 58 percent – indicating that their farms’ financial conditions were worse than a year ago. That number compares to August’s figure, when 81 percent felt their farms were in worse financial condition than a year earlier.
            In light of the new administration in Washington, D.C. the survey asked producers for their thoughts on the regulatory environment affecting agriculture. Of the respondents, 41 percent said they thought those regulations affecting agriculture would be less restrictive in the next five years. Only 29 percent thought those regulations would be more restrictive.
            The survey is tracking growing optimism among producers. In October, only 17 percent expected conditions to improve in the coming year; but by January 39 percent said they expect their farm’s financial picture to improve in the year ahead. Economists at Purdue said this is the most positive response producers gave to this question since the inception of the survey.
            The survey asked producers about their expectations for stronger commodity prices in the next 12 months and analysts noted that “it’s not clear that the recent uptick in producer sentiment is being motivated by expectations for stronger commodity prices in the future.”
            When asked about corn, soybean, wheat and cotton prices in the next 12 months, the number of farmers who had greater expectations for commodity prices was only slightly higher than in October.
            During each fiscal quarter of the year, the survey also reaches out to 100 agricultural lenders, retailers, consultants, academics and agribusiness professionals regarding their sentiment on the future. Those results for this quarter's survey of that group were similar to the results of the producer survey; that number also increased sharply since the last survey of this group in October.
According to the Purdue economists, one difference between producer and agricultural leader sentiment was in their respective expectations for new-crop corn and soybean futures prices.
The group of agricultural leaders was generally less optimistic than producers regarding new-crop corn prices. Fewer respondents in the agricultural leader segment of the survey expected new-crop corn futures to reach new contract highs. A larger share of the agricultural leaders than producers expect new futures contract lows to be set for both corn and soybeans.