From DTN:
OMAHA, Neb. (March 23, 2015) – Crop and livestock producers’ confidence about the direction of the agriculture economy has reached a historic low, according to the latest DTN/The Progressive Farmer Agriculture Confidence Index (ACI).
Since the last ACI survey in December, producer confidence has shifted from an optimistic rating of 103.4 to a pessimistic level of 98.8. The value of 100 is considered neutral. Values above 100 indicate optimism, whereas values below signify pessimism.
The confidence index, which surveyed 500 crop and livestock producers from Feb. 18 to March 2, measures the sentiments of crop and livestock producers on their overall agriculture sector impressions. The ACI is conducted three times each year – before planting, prior to harvest and after harvest. Producers also rate current and long-term input prices and net farm income to gauge their attitudes toward the present situation and future expectations.
“It’s the most pessimistic producer confidence reading yet,” said DTN Markets Editor Katie Micik, director of the confidence index. “The latest producer confidence rating marks the second time in the last three ACI surveys that producers’ confidence levels were pessimistic.”
A year ago, producer confidence stood at 106.9 then fell 99.8 in August 2014 for the first pessimistic rating since DTN/The Progressive Farmer began the ACI survey in April 2010.
“Concerns over stagnant or falling commodity prices, increased crop production and rising crop input costs contributed to crop producers’ pessimism,” Micik said. “But livestock producers’ pessimism increased as well. They are worried about the prospects of lower prices brought on by beef, pork and poultry expansion.”
Livestock producer confidence fell to 99.2 from 106.4 in December and a near record high of 116.4 last March. Crop producer confidence dropped from 101.9 four months ago to 98.4, the second lowest rating ever behind last August’s 96.3.
Crop and livestock producers remain slightly positive about their present conditions. However, this optimism has weakened significantly in three years. Since March 2012, producers’ attitudes about their current situation have fallen from a high of 140.2 to a record low of 109.1. Micik noted this prolonged decline continues to keep producers pessimistic about the future. After reaching a two-year high in December, producers’ expectations for the next 12 months dropped five points to 92.0 in March, just shy of the two-year average of 92.6.
“In previous surveys, Midwestern farmers tended to be more pessimistic than farmers in other regions. Now that sentiment has spread to other regions except the Southwest,” said Micik.
Midwest farmers had a pessimistic rating for confidence (96.3), present situation (95.5) and expectations (96.9), marking the first time ever that a single region did not have at least one optimistic score. Lead by uncertain cotton prices and acreage, Southeast farmers had a 94.2 confidence level, the lowest of any region. Southwest farmers’ confidence rating checked in at 107.7, down from 112.1 in December and the lowest rating in two years.
Rising crop input costs have producers troubled. According to the recent survey, 43 percent say current prices are bad. Another 38 percent say prices are normal, and less than 20 percent of survey respondents think current prices are good, the lowest score since the initial ACI survey in April 2010. While producers think current crop input prices are poor, 23 percent remain hopeful that these costs will improve 12 months from now, which is the highest rating for this category in the survey’s history. Thirty-six percent think prices will get worse while 41 percent say they will stay the same.
Over the past two years, producers’ sentiments toward current farm income has changed dramatically as commodity prices have dropped. In December 2012, 46 percent of producers felt their current farm income was good and just 15 percent replied bad. In the recent survey, 28 percent said current farm income was good, while 32 percent said it was bad, which is the highest rating in four years.
“Producers’ assessment of income one year down the road is even bleaker as 42 percent say income will be worse next year compared with 41 percent who think it will be the same. This is the first time more farmers have been pessimistic than neutral on the income outlook for the upcoming year,” said Micik.
Agribusiness Confidence Index
Agribusiness confidence, present situation and future expectations also dropped the past four months, just not as dramatically as producer confidence. Overall, agribusiness confidence remains optimistic, but it has eroded the past year. According to the DTN/The Progressive Farmer Agribusiness Confidence Index, which measured the sentiments of 100 agribusinesses from Feb. 19 to March 5, agribusiness confidence dropped to 104.7 from 105.5 in December and 107.3 last March.
Agribusiness perceptions of their current situation fell to the lowest level in two years. In the past year alone, agribusinesses’ view of their present situation has fallen from 121.6 last March to 114.5. Agribusinesses continue to be pessimistic about the future. Agribusiness expectations dropped to 98.0 from 99.2 last December.
“Agribusiness pessimism could be attributed to concerns by farmer-customers over rising input costs at a time when commodity prices have dropped the past 12 months,” said Micik. “Last spring 72 percent of agribusinesses felt sales were good. That number has now dropped to 50 percent. However, sales expectations for the next year have held steady with 90 percent predicting sales to get better or remain the same compared with 88 percent last March.”
As for agribusiness profitability, 40 percent view it as good, 52 percent normal, and 7 percent as bad. Because of concerns over tighter margins, Micik said, only 19 percent of agribusinesses believe profitability will get better the next 12 months, compared with 26 percent just four months ago. In addition, 32 percent of the agribusinesses surveyed expect overall prospects for their business to get better the next 12 months, which is down from 36 percent last December.
Visit dtnprogressivefarmer.com for more on the DTN/The Progressive Farmer Agriculture/Agribusiness Confidence Index. Follow DTN/The Progressive Farmer on Twitter at @DTNPF or on Facebook at facebook.com/dtnprogressivefarmer.