Producer sentiment holds steady, but lack of new farm bill concerns farmers

Agricultural producer sentiment held steady in November with producers remaining optimistic about the state of the agricultural economy, according to results from the Purdue University/CME Group Ag Economy Barometer. The November barometer reading of 134 was only 1 percent lower than October, which is similar to levels seen last spring before trade disruptions began. The barometer utilizes a survey of 400 agricultural producers from across the country.

The barometer’s two sub-indices remain mostly unchanged from October; the Index of Current Conditions held at 115, and the Index of Future Expectations dropped 3 points to a reading of 143.

“Although there was a modest decline in the barometer this month, there was some evidence that producers are becoming more confident regarding the U.S. agricultural economy’s future,” said James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.

That confidence can be seen in producers’ attitudes toward their willingness to make large farm investments. Each month producers are asked whether now is a “good time” or “bad time” to make a large investment in buildings and machinery. Their responses are used to produce a large investment index. In November, that investment index stood at 56, up from 52 in October, and 10 points higher than in September of 2018 when the index set a new low of 42.

Producers were also more optimistic regarding their long-term perspective on farmland values, with 50 percent expecting higher farmland values over the next five years, a sharp departure from a month earlier when just 21 percent said they expected higher farmland values.

However, this increase in confidence was not driven by expected improvements in profitability. In November, only 13 percent of respondents said they expect farm profitability to improve in the next 12 months. When asked about farmers’ equity position, 44 percent expect to see equity diminish in the upcoming year. Rising interest rates could also be a factor in these perceptions as that can impact profitability and the value of large farm assets. When asked, 85 percent of producers said they expect interest rates to rise in the next year, and 76 percent expect to see a rise in the next five years compared to 2018.

With November marking an end to the mid-term election cycle, producers were asked whether they were concerned that Congress had not passed new farm bill legislation. Seventy-five percent of respondents said they were either “somewhat or very concerned,” 33 percent said they were “very concerned,” and 24 percent said they were “not at all concerned” about the lack of new Farm Bill legislation.

Read the full November Ag Economy Barometer report at http://purdue.edu/agbarometer. This month’s report includes additional information on producers’ future expectations for agricultural exports and an update on producers’ intentions to reduce their soybean acreage in the 2019 season. Additional November barometer analysis can also be found in a video from Mintert at https://youtu.be/Q-9NqD14EdE.

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.