Price Rally Helps Farmers’ Sentiment
DES MOINES, Iowa —Farmers always ask one another, “How are things going?” Well, now there might be an answer to that question supplied by a new Ag Economy Barometer released Tuesday.
The barometer is made up of an index calculation, according to its founders, Purdue University and the CME Group. The monthly index includes a basket of ag information compiled from a survey of 400 farmers from across the U.S., measuring the health of the agricultural economy.
The two entities announced the new Ag Economy Barometer, after conducting monthly calculations since October. But, the barometer’s best reading came in April. Essentially, if the index reading is over 100, it indicates a positive farmers’ sentiment; a reading below the 100-point baseline indicates a declining sentiment.
GOOD FEELINGS IN APRIL
Following a series of declines in the Ag Economy Barometer from October through March, the April reading rebounded sharply. The index improved from 85 in March to 106 in April, a reading that was just slightly below its December 2015 level.
Each month’s Index of Current Conditions, second layer of the barometer, is derived from producers’ responses to three questions focused on their operations’ financial conditions now and 12 months from now, as well as their general expectations for good or bad times in agriculture over the next 12 months. Recent events, especially in crop agriculture, appear to be driving the improvement in the Ag Economy Barometer.
The shift in the Ag Economy Barometer during April appears to have been driven, in part, by changes in corn, soybean, and wheat prices, according to Purdue University ag economists working on the barometer. “After several months of trending lower and a sharp decline in corn prices following release of USDA’s March Prospective Plantings report, corn, soybean, and wheat prices all increased during April.
For example, July corn futures prices rose to levels last seen in early November 2015, and soybean futures prices increased by approximately $1 per bushel from early April to mid-month when the survey was conducted, the Purdue experts stated in a press release Tuesday.
“During the winter, lower-trending commodity prices weighed heavily on producers’ expectations regarding future crop prices. When asked if prices would be higher, lower, or about the same in 12 months, those reporting lower price expectations for major crops (corn, soybeans, wheat, and cotton) peaked in March. But this trend reversed course in April, as fewer producers reported expecting lower prices one year ahead,” Purdue experts stated.
Improvement in crop prices is not the only factor leading to an improvement in producer sentiment, says Purdue barometer experts. “The uptick in sentiment corresponds to several other factors, as well. Timely rains in the Great Plains beneficial to the wheat crop improved the yield and revenue outlook for many wheat producers. Favorable spring weather in the Corn Belt, which boosted planting progress above the five-year average, encouraged optimism among producers about 2016 yield prospects. Weather issues in South America, particularly in Argentina (excessive rain) and Brazil (heat and dryness), combined with a weaker U.S. dollar, could boost prospects for U.S. grain and oilseed exports.”
SHADOWS STILL LINGER
“While the most recent reading of the Ag Economy Barometer reveals an uptick in producers’ sentiment, it is important to keep the situation in perspective. Overall, the general agricultural outlook is still difficult, and the producer survey reflects this concern. When asked about expectations for their farms’ financial situations, a majority of producers reported that expectations regarding the broad agricultural economy over the next 12 months were for “bad times financially,” Purdue experts stated in the press release.