The Purdue/CME Group Ag Economy Barometer dropped 7 points in November, signaling a slump in U.S. agricultural producers’ confidence compared to a month earlier. At a reading of 128, the measure of producer optimism in November was the second weakest observed during 2017 and stood just 4 points above the 2017 low of 124, set in March (Figure 1). Based on a monthly phone survey of 400 agricultural producers from across the U.S., the latest results, although indicating producers were less confident about the agricultural economy than in October, still suggest agricultural producers remain more optimistic than they were prior to the fall 2016 election.
Figure 1. Purdue/CME Group Ag Economy Barometer, October 2015–November 2017.
Less Optimism About the Future Among Producers
The November slide in producer sentiment was driven by producers taking a less optimistic view of the future. The Index of Future Expectations declined 10 points compared to October as the index fell to 127. The decline in optimism about future economic conditions stands in contrast to producers’ assessment of current economic conditions, however, as the Index of Current Conditions reading of 129 in November was unchanged from October. (Figure 2).
Figure 2. Index of Current Conditions and Index of Future Expectations, October 2015–November 2017.
To provide insight into what’s driving changes in the barometer and its two sub-indices, Figure 3 shows producers’ responses since October 2015 to a question focused on the U.S. agricultural economy, looking ahead 12 months. The percentage of producers expecting “bad times” for the agricultural economy in the year ahead climbed to 62 percent on the November survey. The percentage of producers expecting bad times for the agricultural economy has been increasing since July, when it hit a summertime low of 50 percent. At the same time, the percentage of producers expecting good times for the agricultural economy in the upcoming year dipped to 28 percent in November, down from 35 percent in October.
Figure 3. Share of producers expecting “good times” and “bad times” financially in the U.S. agricultural economy during the upcoming 12 months, October 2015 – November 2017.
Producers see Farmland Values Stabilizing
On a regular basis, producers are asked about their expectations for farmland values. In November, a record low percentage (17 percent) of respondents indicated they expect farmland prices in their area to decline over the next 12 months (Figure 4). The decline in producers expecting lower farmland prices was accompanied by a small uptick in the share of respondents (21 percent) expecting farmland values to turn higher in the year ahead. Notably, for the first time in survey history, more producers expect farmland values to increase in the upcoming year than decline. Not included in Figure 4 is the share of respondents expecting farmland values to be “about the same,” over the upcoming 12 months. In November, the share of producers expecting no change in farmland values reached a life of survey high of 62 percent, nine percentage points above the previous peak of 53 percent, set in February 2017. So, the biggest change in attitudes in recent months has been a shift away from producers expecting farmland values to decline to an expectation that values are likely to stabilize.
by James Mintert, David Widmar and Michael Langemeier, Purdue/CME Group