Reprinted by permission of the Purdue University Center for Commercial Agriculture
In April, the Purdue University/CME Group Ag Economy Barometer recorded the fourth largest one-month drop since data collection began in October 2015. The barometer, which is a sentiment index based on a monthly survey of 400 agricultural producers across the U.S., declined 18 points to a reading of 115, down from 133 in March.
This month’s decline in the barometer was driven by worsening perceptions of both current economic conditions and weaker expectations for the future. Index of Current Conditions
This month producers also expressed caution about making large investments in their farming operations. In the April survey, when asked whether they feel now is a “good time” or “bad time” to make large farm investments, only 22 percent of farmers stated it was a “good time” while 74 percent stated it was a “bad time.” That combination pushed the Large Farm Investment Index
Producers also expressed less optimism regarding prospects for resolution of the on-going soybean trade dispute with China. On the April survey, only 28 percent of respondents felt that the dispute would be resolved before July 1, down from 45 percent in March. However, 71 percent still feel the dispute will ultimately be resolved in a way that benefits U.S. agriculture. In a separate question, when asked whether they felt that the U.S. should rejoin the Trans-Pacific Partnership (TPP), 47 percent were favorable, 28 percent were not in favor, and 25 percent stated they were uncertain.
Since January, there has been an increase in survey respondents indicating they have concerns about commodity prices. As a result, we’ve been asking additional questions related to commodity prices in order to understand producers’ perspectives on the future direction of corn and soybean futures prices. For the past four months, those results have been compared with futures and options market-based probability estimates to determine whether there is a significant difference in sentiment between the producers and futures and options market participants. Early findings indicate producers have consistently been more pessimistic compared to those who participate directly in the futures and options markets. Moreover, producers became relatively more pessimistic over the course of the winter and early spring. This increasingly pessimistic view of corn and soybean prices may be playing a role in the reduction in barometer sentiment as well as the recent drop in both the Index of Current Conditions and the Index of Future Expectations.
Read the full April Ag Economy Barometer R