The latest ag economic survey from Purdue University and CME Group shows that producer optimism continues to climb further into record territory despite mixed views on commodities prices and limited confidence in farm financials.
The Purdue/CME Group Ag Economy Barometer, based on a quarterly survey of 400 agricultural producers from across the US, reached 153 in January, the highest figure yet and the largest month-to-month sentiment boost since data collection began in October 2015 (Chart 1).
The report’s authors attributed the jump to favorable expectations regarding the future, perceived improvement in current agricultural sector conditions – motivated in part by improvements in commodity prices through much of the fall – and a sentiment that the regulatory environment under the administration of President Donald Trump could be less burdensome.
From mid-October to mid-January, futures prices for CME February lean hogs increased over 30 percent, while CME February live cattle futures prices rose over 20 percent and CBOT March soybean futures prices increased more than 10 percent, according to the report.
“However, it’s not clear that the recent uptick in producer sentiment is being motivated by expectations for stronger commodity prices in the future,” its authors wrote.
Wheat prices expectations looking 12 months into the future rose from the October survey to January’s, from just over 20 percent to one-third. However, despite commodity prices usually acting as a driver to boost confidence, expectations for corn, soybean, wheat and cotton prices rose only slightly.
The marked increase in optimism follows Trump’s election to the presidency in November, which brought with it the expectation that business will face a less restrictive regulatory environment in the years ahead; 41 percent of respondents expect a less restrictive regulatory environment five years from now, while 30 percent believe it will stay the same and 29 percent said it will become more restrictive, according to the report.
A majority of respondents, 58 percent, indicated that their farm operations’ financial conditions were worse than a year ago, which reflected a tie for the lowest percentage on record. Meanwhile, just 39 percent of respondents expect their financial condition to be better 12 months from now, but that represented a record high (Chart 2).