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Long-term outlook strengthens from Ag Barometer

by Whitney Flach

The Purdue University/CME Group Ag Economy Barometer, is based on a monthly survey of 400 agricultural producers. The barometer came in at 112 for July, up from 104 in June and 97 in May. Despite the fact that grain and oilseed prices declined sharply in late June and early July, the report showed improvement in producer sentiment. The producer Index of Future Expectations from June’s observation was 107, but July jumped to 121. This month was the highest reading for the index since data collection began in the fall of 2015.

Future conditions in the agricultural sector improved. However, the Index of Current Conditions, declined to a value of 93. In June, the reading was 98. The report noted, “Although the uptick in crop prices this spring was short-lived and prices retreated in late June and July, it appears the price rally boosted producers’ expectations regarding future economic conditions in agriculture.”

Also in the report, 69% of survey respondents indicated that they expect bad financial times in the agricultural economy over the next 12 months. Only 40% of producers reported expectations of bad financial times. The July reading was lower than during May and June, suggesting that producers are becoming more optimistic regarding the long-run agricultural outlook for several months.

As far as expectations regarding commodity prices, more respondents expected higher crop prices in the future than they did in recent months. Expectations for wheat prices 12 months out, were more optimistic as the highest share of respondents expecting higher wheat prices was observed during July. 23% of respondents reported expecting higher farmland values over the next year. This was higher than in any previous survey since October 2015. The share of respondents were expecting lower farmland values 12 months out. “The decline in crop prices that took place during late June and July helped push down agricultural producers’ perspective regarding current economic conditions, but this decline was more than offset by an improvement in producers’ longer-run view of economic conditions in agriculture, resulting in an improvement in the July reading of the Ag Economy Barometer,” the report noted.

David Widmar, an agricultural economist at Purdue University, says “ I think what caused the overall sentiment to go up, is producers are feeling a bit better about the long-run prospects in agriculture.”

The Producer Sentiment Index jumped to 112 in July, despite falling grain prices. (Purdue University/CME Group Ag Economy Barometer/David Widmar)
The Producer Sentiment Index jumped to 112 in July, despite falling grain prices. (Purdue University/CME Group Ag Economy Barometer/David Widmar)