Producers more optimistic in January; many expect lower taxes

WEST LAFAYETTE, Ind. and CHICAGO – Agricultural producers said in January that they were more optimistic about the agricultural economy than a month prior, according to the Purdue University/CME Group Ag Economy Barometer.

The January barometer read 135, up 9 points from December’s 126. The uptick was driven by increases in both the Index of Current Conditions, which climbed 5 points to 144, and the Index of Future Expectations, which climbed 11 points to 131.This marks the largest one-month improvement in future expectations since January 2017.

The barometer is based on a monthly survey of 400 agricultural producers from across the U.S. Each month, survey respondents are asked whether their farm operations are financially better off, worse off, or about the same. In January, 43 percent said their farms were financially worse off than a year ago, while 14 percent said their farms were financially better off.According to James Mintert, director of Purdue University’s Center for Commercial Agriculture and the barometer’s principal investigator, the 43 percent number is significant.

“To help put January’s responses in perspective, the percentage of farmers who felt their operations were financially worse off reached a high of 81 in August 2016,” he said. “Since April 2017, the share reporting that their farms were financially worse off has consistently fallen below 50 percent. The reduction has been an important driver of the ongoing improvement in the Index of Current Conditions.”

Another potential driver of producer sentiment in January was the passage of the Tax Cuts and Jobs Act of 2017. Surveyed producers were asked to rate the likely impact on their farming operations, as well as their families’ tax burdens. Nearly half of all producers said they expect the tax bill to be beneficial to their operations. Conversely, 19 percent said they expect the tax bill to have a negative impact on their farming operations. The remaining 35 percent gave a neutral response.

When it came to producers’ expectations for their families’ tax burdens, 43 percent said they expect a decline, 18 percent expect an increase, and 40 percent said they expect their families’ tax burdens to stay about the same.

“It’s possible the 40 percent of respondents expecting no changes in their taxes and the 35 percent who provided a neutral rating could reflect uncertainty regarding the specific content of the tax bill and the fact that IRS regulations implementing the tax bill have yet to be issued,” Mintert said.

Each quarter, a parallel survey gauges the sentiment of 100 agricultural thought leaders. Sentiment among thought leaders declined sharply from October’s survey, falling from 152 to 127. The decline in agricultural thought leaders’s sentiment was driven in part by their more negative perspective on current conditions than they had last fall.

Read the full January Ag Economy Barometer and Ag Thought Leaders Survey report at purdue.edu/agbarometer.

The quarterly Ag Economy Barometer webinar will be Feb. 8 at 1:30 p.m. Barometer researchers will discuss the drivers of sentiment. Register for the free webinar at https://ag.purdue.edu/commercialag/ageconomybarometer/update/.

The Ag Economy Barometer, Index of Current Conditions and Index of Future Expectations are available on the Bloomberg Terminal under the following ticker symbols: AGECBARO, AGECCURC and AGECFTEX.

 

About the Purdue University Center for Commercial Agriculture

The Center for Commercial Agriculture was founded in 2011 to provide professional development and educational programs for farmers. Housed within Purdue University’s Department of Agricultural Economics, the center’s faculty and staff develop and execute research and educational programs that address the different needs of managing in today’s business environment.

 

About CME Group

As the world’s leading and most diverse derivatives marketplace, CME Group (www.cmegroup.com) is where the world comes to manage risk.  CME Group exchanges offer the widest range of global benchmark products across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural products and metals.  Around the world, CME Group brings buyers and sellers together through its CME Globex® electronic trading platform.  CME Group also operates one of the world’s leading central counterparty clearing providers through CME Clearing, which offers clearing and settlement services across asset classes for exchange-traded and over-the-counter derivatives.  CME Group products and services ensure that businesses around the world can effectively manage risk and achieve growth.

 

CME Group, the Globe logo, CME, Chicago Mercantile Exchange, Globex and E-mini are trademarks of Chicago Mercantile Exchange Inc.  CBOT, Chicago Board of Trade, KCBT and Kansas City Board of Trade are trademarks of Board of Trade of the City of Chicago, Inc.  NYMEX, New York Mercantile Exchange and ClearPort are trademarks of New York Mercantile Exchange, Inc.  COMEX is a trademark of Commodity Exchange, Inc.  Dow Jones, Dow Jones Industrial Average, S&P 500 and S&P are service and/or trademarks of Dow Jones Trademark Holdings LLC, Standard & Poor’s Financial Services LLC and S&P/Dow Jones Indices LLC, as the case may be, and have been licensed for use by Chicago Mercantile Exchange Inc.  All other trademarks are the property of their respective owners.

 

 

Writer: Jennifer Stewart-Burton, 765-496-6032, jsstewar@purdue.edu

 

Sources: Jim Mintert, 765-494-4310, jmintert@purdue.edu

David Widmar, 765-494-0848, dwidmar@purdue.edu

Chris Grams, 312-930-3435, chris.grams@cmegroup.com

 

Related website:

Purdue University Center for Commercial Agriculture: http://purdue.edu/commercialag

CME Group: http://www.cmegroup.com/

 

 

Photo Caption: The Purdue/CME Group Ag Economy Barometer climbed 9 points to 135 in January with increases in both the Current Conditions and Future Expectations indices. (Purdue/CME Group Ag Economy Barometer/David Widmar)

 

A publication-quality photo is available at https://news.uns.purdue.edu/images/2018/mintert-january.jpg.