Producer sentiments took a post-election jump in the month of December. The Purdue University/CME Group Ag Economy Barometer December reading of 132 marked the second straight monthly increase. That’s also the highest level since the survey began in October of 2015. The December mark was 16 points above the November mark and 40 points higher than October. Producers seemed optimistic about both current and future conditions in the December survey, but the biggest improvement was in producers’ expectations about future economic conditions. The index of Future Expectations jumped to an impressive 146 total, up 51 points over October and the highest number since data collection began. The improved expectations are for outside of agriculture as well. The October sentiment before the elections and the December expectations after the elections were drastically different. Only 13 percent of October respondents expected the overall economy to improve, but 50% of the December respondents expect the economy to expand. In October, 35 percent of respondents expected good times ahead for U.S. economy over the next five years. In December, that number jumped to 71 percent.
From the National Association of Farm Broadcasting news service.
From: Purdue University/CME Group
Post-Election Improvement in Ag Producer Sentiment Continues in December
by James Mintert, David Widmar, Michael Langemeier
Agricultural producer sentiment rose sharply as 2016 drew to a close. December’s reading of 132 for the Purdue/CME Group Ag Economy Barometer marked the second month in a row that the index increased, rising to its highest level since data collection began in October 2015. The December reading is 16 points above November’s and 40 points higher than in October (Figure 1). The barometer is based on a monthly survey of 400 agricultural producers from across the country.
Figure 1. Purdue/CME Group Ag Economy Barometer. October 2015 to December 2016.
Optimism about both current and future economic conditions helped drive the barometer higher during December. Although both of the Ag Economy Barometer’s sub-components, the Index of Current Conditions and Index of Future Expectations, increased during December, the biggest improvement was in producers’ expectations about future economic conditions (Figure 2). The Index of Future Expectations rose to 146 in December, 51 points higher than during October and the highest reading in 15 months of data collection. The Index of Current Conditions has been trending higher since September but the improvements were quite modest, until December. At a value of 102 in December, the measure of current economic conditions was 15 points above the November reading and 22 points above its August low of 80.
Interestingly, the improvement in producer sentiment over the last two months does not appear to be motivated primarily by changes in corn and soybean prices. For example, March 2017 CBOT corn futures prices were actually slightly weaker when survey responses were gathered in November and December than during the October survey period. In the soybean complex, January 2017 CBOT soybean futures prices during the November survey period were virtually unchanged, and in December were only slightly stronger, compared to prices observed during the October survey collection period.
Figure 2. Index of Current Conditions and Index of Future Expectations. October 2015 to November 2016.
Optimism Extends Beyond the Ag Economy
The improvement in producer sentiment extends beyond agriculture. In both October and December producers were asked about their expectations regarding the broad U.S. economy. The contrast in sentiment from the October survey, three weeks prior to the U.S. elections, and the December survey, five weeks following the elections, is remarkable. When asked about the U.S. economy over the next 12 months on the October survey, just 13 percent of respondents expected the U.S economy to expand and 23 percent thought a contraction in the U.S. economy was likely (Figure 3). When the same question was posed on the December survey, fully half of the respondents expected the economy to expand and just 13 percent expected the economy to contract during the upcoming year.
The improvement in sentiment regarding the U.S. economy was not limited to just the next 12 months. When asked about their perspective regarding the U.S. economy over the next five years, the change in sentiment from October to December was equally dramatic. In October, 35 percent of respondents indicated they expect “widespread good times” for the U.S. economy over the next five years (Figure 4). In December, the share of respondents expecting widespread good times more than doubled to 71 percent. The improvement in optimism regarding the U.S. economy among agricultural producers appears to parallel that of U.S consumers. For instance, the University of Michigan’s Index of Consumer Sentiment rose from a reading of 87 in October to a 12-year high of 98 in December.
Figure 3. Producer expectations about the U.S. economy over the next 12 months, October 2016 and December 2016.
Figure 4. Producer expectations about the U.S. economy over the next five years, October 2016 and December 2016.
Future Expectations (Read more of the report.)