{"id":1392,"date":"2017-09-05T09:30:17","date_gmt":"2017-09-05T13:30:17","guid":{"rendered":"https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/?p=1392"},"modified":"2017-09-05T15:47:48","modified_gmt":"2017-09-05T19:47:48","slug":"producer-sentiment-drifts-lower-august-commodity-prices-weaken","status":"publish","type":"post","link":"https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/producer-sentiment-drifts-lower-august-commodity-prices-weaken\/","title":{"rendered":"Producer Sentiment Drifts Lower in August as Commodity Prices Weaken"},"content":{"rendered":"<p><em>James Mintert, David Widmar and Michael Langemeier<\/em><\/p>\n<p>The Purdue\/CME Group Ag Economy Barometer drifted lower in August to 132 points, down seven points from a month earlier, but still markedly stronger than a year ago when the index was just 95. The barometer, a sentiment index based on a monthly survey of 400 agricultural producers from across the U.S., dropped back near to the level observed from April through June of this year. Since peaking in January at a reading of 153, monthly barometer readings have ranged from a low of 124 in March to 139 in July.<\/p>\n<p>&nbsp;<\/p>\n<div id=\"attachment_1396\" style=\"width: 610px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-1396\" class=\"wp-image-1396\" src=\"https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-1.png\" alt=\"Figure 1\" width=\"600\" height=\"406\" srcset=\"https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-1.png 960w, https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-1-300x203.png 300w, https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-1-768x519.png 768w, https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-1-348x235.png 348w\" sizes=\"auto, (max-width: 600px) 100vw, 600px\" \/><p id=\"caption-attachment-1396\" class=\"wp-caption-text\"><strong>Figure 1.<\/strong> Purdue\/CME Group Ag Economy Barometer, October 2015 to August 2017.<\/p><\/div>\n<p>The change in sentiment in August versus July was largely driven by a decline in the Index of Current Conditions (Figure 2) to 122, a 20-point decline compared to a month earlier. Previously, the Index of Current Conditions, which reached a life-of-survey high in July 2017 at 142 points, had been a key source of support for the Ag Economy Barometer, going back to Fall 2016. In contrast, the Index of Future Expectations, the barometer\u2019s other sub-index, was at 137 in August, virtually unchanged from the July reading of 138.<\/p>\n<div id=\"attachment_1397\" style=\"width: 610px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-1397\" class=\"wp-image-1397\" src=\"https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-2.png\" alt=\"Figure 2\" width=\"600\" height=\"405\" srcset=\"https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-2.png 960w, https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-2-300x203.png 300w, https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-2-768x518.png 768w, https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-2-348x235.png 348w\" sizes=\"auto, (max-width: 600px) 100vw, 600px\" \/><p id=\"caption-attachment-1397\" class=\"wp-caption-text\"><strong>Figure 2.<\/strong> Index of Current Conditions and Index of Future Expectations, October 2015 to August 2017.<\/p><\/div>\n<p>&nbsp;<\/p>\n<p><strong>Grain Market Retreat Key to Weakening Index of Current Conditions<\/strong><\/p>\n<p>Weakness in the Index of Current Conditions compared to July was not unexpected given the recent downtrend in grain and oilseed prices. For example, from July 17 to August 21 \u2013 the first days of the July and August sentiment surveys, respectively \u2013 the December 2017 corn futures contract price fell 6 percent. Moreover, the December 2017 corn futures contract also traded most of the month of August well below levels observed last winter and spring. Prices for wheat and soybeans also weakened generating additional concern about farm revenues and profitability.<\/p>\n<p>To learn whether or not producers expected grain prices to rebound, producers were asked on the August survey if the best opportunity to market grain was \u201cover the last six months,\u201d or would be in the \u201cupcoming six months.\u201d A majority of producers (59 percent) thought the best opportunity was in the last six months. However, there was still a relatively large share of producers (41 percent) expecting good grain marketing opportunities in the upcoming six months.<\/p>\n<p>&nbsp;<\/p>\n<div id=\"attachment_1398\" style=\"width: 610px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-1398\" class=\"wp-image-1398\" src=\"https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-3.png\" alt=\"Figure 3\" width=\"600\" height=\"525\" srcset=\"https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-3.png 923w, https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-3-300x263.png 300w, https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-3-768x672.png 768w, https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-3-268x235.png 268w\" sizes=\"auto, (max-width: 600px) 100vw, 600px\" \/><p id=\"caption-attachment-1398\" class=\"wp-caption-text\"><strong>Figure 3.<\/strong> December 2017 Corn Futures Contract. Source: CME Group.<\/p><\/div>\n<p>&nbsp;<\/p>\n<p><strong>Pessimistic Neighbors<\/strong><\/p>\n<p>To learn more about the mood in the agricultural community, the August survey included a question asking producers about their neighbors\u2019 sentiments regarding the current agricultural economy. An overwhelming majority of respondents \u2013 71 percent \u2013 reported that farmers in their area were \u201cpessimistic\u201d about the current state of the agricultural economy, while a relatively small share (29 percent) reported their neighbors as being \u201coptimistic\u201d (Figure 4).<\/p>\n<p>&nbsp;<\/p>\n<div id=\"attachment_1393\" style=\"width: 610px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-1393\" class=\"wp-image-1393\" src=\"https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-4.png\" alt=\"Figure 4\" width=\"600\" height=\"402\" srcset=\"https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-4.png 959w, https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-4-300x201.png 300w, https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-4-768x515.png 768w, https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-4-350x235.png 350w\" sizes=\"auto, (max-width: 600px) 100vw, 600px\" \/><p id=\"caption-attachment-1393\" class=\"wp-caption-text\"><strong>Figure 4.<\/strong> Producers\u2019 pesponses regarding other farmers\u2019 perspectives on the current farm economy.<\/p><\/div>\n<p><strong>\u00a0<\/strong><\/p>\n<p><strong>Trends of the Last Year<\/strong><\/p>\n<p>The Index of Current Conditions trended higher over most of the last year, with the August 2017 survey being the biggest exception. Over the course of the last 12 months, improvement in farmers\u2019 perspectives regarding current conditions contributed to increases in the Ag Economy Barometer. What actually drove the longer-term shift in the Index of Current Conditions?<\/p>\n<p>One of the most significant changes that took place over the last year was a shift in producers\u2019 perceptions regarding their farms\u2019 financial positions compared to a year earlier (Figure 5). In August 2016, a life-of-survey high of 81 percent of respondents said their farms were financially \u201cworse off\u201d than the year before. But over the course of the last 12 months, responses to this question changed markedly with roughly half as many producers responding \u201cworse off\u201d on the August 2017 survey.<\/p>\n<p>&nbsp;<\/p>\n<div id=\"attachment_1394\" style=\"width: 610px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-1394\" class=\"wp-image-1394\" src=\"https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-5.png\" alt=\"Figure 5\" width=\"600\" height=\"405\" srcset=\"https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-5.png 1501w, https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-5-300x203.png 300w, https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-5-768x519.png 768w, https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-5-1024x692.png 1024w, https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-5-348x235.png 348w\" sizes=\"auto, (max-width: 600px) 100vw, 600px\" \/><p id=\"caption-attachment-1394\" class=\"wp-caption-text\"><strong>Figure 5.<\/strong> Share of producers reporting their farm operations as financially \u201cbetter off\u201d or \u201cworse off\u201d than a year ago.<\/p><\/div>\n<p>&nbsp;<\/p>\n<p>The second big change was a shift in expectations for the upcoming year. On a quarterly basis, producers report their expectations about farmers\u2019 profitability, broadly speaking, over the next 12 months. When comparing the results of August 2016 to August 2017, far fewer respondents expected farmers\u2019 profitability to \u201cdiminish\u201d over the next 12 months, while a larger share of respondents reported that they expected profitability to improve (Figure 6).<\/p>\n<p>&nbsp;<\/p>\n<div id=\"attachment_1395\" style=\"width: 610px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" aria-describedby=\"caption-attachment-1395\" class=\"wp-image-1395\" src=\"https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-6.png\" alt=\"Figure 6\" width=\"600\" height=\"405\" srcset=\"https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-6.png 975w, https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-6-300x202.png 300w, https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-6-768x518.png 768w, https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/wp-content\/uploads\/2017\/09\/Figure-6-348x235.png 348w\" sizes=\"auto, (max-width: 600px) 100vw, 600px\" \/><p id=\"caption-attachment-1395\" class=\"wp-caption-text\"><strong>Figure 6.<\/strong> Respondents\u2019 expectations of farmers\u2019 profitability over the next 12 months.<\/p><\/div>\n<p>&nbsp;<\/p>\n<p>As noted in earlier reports, figure 5 and figure 6 highlight an overall theme of the Ag Economy Barometer project throughout 2017. While there has been an improvement in sentiment, and an increase in positive responses to specific questions, conditions in production agriculture are still challenging for many farm operations. Even though fewer producers reported in August 2017 that their farms were \u201cworse off\u201d financially compared to a year prior, a large share (41 percent) did report their farms were \u201cworse off\u201d than a year earlier. Additionally, only a small share (8 percent) said their farms were \u201cbetter off\u201d than in the previous year (Figure 5). Likewise, nearly one-quarter of respondents expect farmers\u2019 profitably to diminish in 2018 whereas less than 15 percent expect an improvement (Figure 6).<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Conclusions<\/strong><\/p>\n<p>Farmers\u2019 perspectives about current economic conditions weakened in August compared to a month earlier. Weakness in commodity prices was likely a key factor in the sentiment shift from July to August. However, despite the decline in the Index of Current Conditions, agricultural producers remain more upbeat about prospects for their own farms as well as the agricultural sector than they were at this time last year. Recent declines in commodity prices did not appreciably dampen farmer expectations regarding future economic conditions, although some concerns were apparent as approximately six out of 10 respondents indicated that grain-marketing opportunities over the last six months were likely better than the opportunities that will be available in the next six months.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>James Mintert, David Widmar and Michael Langemeier The Purdue\/CME Group Ag Economy Barometer drifted lower in August to 132 points, down seven points from a month earlier, but still markedly stronger than a year ago when the index was just 95. The barometer, a sentiment index based on a monthly survey of 400 agricultural producers&hellip;<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_links_to":"","_links_to_target":""},"categories":[2],"tags":[],"class_list":["post-1392","post","type-post","status-publish","format-standard","hentry","category-report"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.1 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Producer Sentiment Drifts Lower in August as Commodity Prices Weaken<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/ag.purdue.edu\/commercialag\/ageconomybarometer\/producer-sentiment-drifts-lower-august-commodity-prices-weaken\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Producer Sentiment Drifts Lower in August as Commodity Prices Weaken\" \/>\n<meta property=\"og:description\" content=\"James Mintert, David Widmar and Michael Langemeier The Purdue\/CME Group Ag Economy Barometer drifted lower in August to 132 points, down seven points from a month earlier, but still markedly stronger than a year ago when the index was just 95. 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