Producer sentiment higher; NAFTA uncertainty looms

Producer sentiment increased for the second straight month in February, but producers continued to indicate uncertainty surrounding a possible U.S. withdrawal from the North American Free Trade Agreement (NAFTA), according to the Purdue University/CME Group Ag Economy Barometer.

The barometer read 140 in February, a 5-point increase from January’s reading of 135. The increases mark a strong 14-point jump since December. February also marked the second-highest barometer reading since data collection began in 2015.

The barometer is based on a monthly survey of 400 U.S. agricultural producers.

The drivers of sentiment have shifted since the barometer hit a survey high of more than 150 points back in January 2017, said James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.

“In early 2017, producer sentiment was largely driven by an uptick in the future-looking measure of producer sentiment, the Index of Future Expectations,” he said. “More recently, the barometer’s upturn has been driven in part by a shift toward more positive sentiment regarding current farm financial conditions, as measured by the Index of Current Conditions.”

In the February survey, researchers asked agricultural producers about the likelihood of the U.S. withdrawing from NAFTA. On a scale of 1-9, the most common response at 39 percent was a neutral rating of 5, while 34 percent of respondents said they thought a U.S. NAFTA withdrawal was likely (a rating of 6 or higher), and 29 percent thought withdrawal was unlikely (a rating of 4 or lower).

“Taken as a whole, the February survey indicates that producers are really uncertain about about the future of NAFTA,” Mintert said. “But despite the uncertainty surrounding NAFTA, producers remain optimistic about the future of U.S. agricultural exports,” Mintert said.

A full 50 percent of responding producers said they expect U.S. agricultural exports to increase over the next five years, while another 37 percent said they expect exports to remain about the same. Only 13 percent said they expect U.S. agricultural exports to be lower five years from now.

In addition to trade, February’s survey asked producers about their expectations for corn and soybean production in the 2018 cropping year. A majority – 71 percent – said soybeans would be more profitable than corn, up 4 percent from the number of respondents who expected soybeans to be more profitable when surveyed in February 2017.

Despite expectations that soybeans will be more profitable, 81 percent of those surveyed said they expect their soybean acreage in 2018 will be unchanged. Only 10 percent expect to plant more soybeans than a year earlier. This differs from the February 2017 survey, when 18 percent of producers reported they expected to increase their soybean acreage.

For more on producers’ trade expectations and planting intentions, read the full February Ag Economy Barometer report at http://purdue.edu/agbarometer.

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) enables clients to trade futures, options, cash and OTC markets, optimize portfolios, and analyze data – empowering market participants worldwide to efficiently manage risk and capture opportunities. CME Group exchanges offer the widest range of global benchmark products across all major asset classes based on interest rates, equity indexes, foreign exchange, energy, agricultural products and metals. The company offers futures and options on futures trading through the CME Globex® platform, fixed income trading via BrokerTec and foreign exchange trading on the EBS platform. In addition, it operates one of the world’s leading central counterparty clearing providers, CME Clearing. With a range of pre- and post-trade products and services underpinning the entire lifecycle of a trade, CME Group also offers optimization and reconciliation services through TriOptima, and trade processing services through Traiana.

CME Group, the Globe logo, CME, Chicago Mercantile Exchange, Globex, and E-mini are trademarks of Chicago Mercantile Exchange Inc. CBOT and Chicago 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. BrokerTec, EBS, TriOptima, and Traiana are trademarks of BrokerTec Europe LTD, EBS Group LTD, TriOptima AB, and Traiana, Inc., respectively. 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.