After tracking a steady three-month period of confidence gains among US agri producers, the Purdue/CME Group Ag Economy Barometer logged a substantial dip in February, declining to a reading of 134 after a 153 record high in January.
David Widmar, agricultural economist at Purdue University, told Agri Investor that the difficulties US farmers will face in the upcoming 2017 season are likely setting in.
“Producers are finalizing their planning for the 2017 season, making budgets and meeting with lenders,” he said. “The reality is that it’s a tough financial environment out there and the gravity of that may be coming to light.”
The barometer’s Index of Current Conditions suggested that “producers feel conditions this winter are only slightly better than during the barometer’s base period of October 2015 [to] March 2016, when the Index averaged 100,” according to the report.
The tepid response was in line with USDA projections that net farm income in 2017 will fall 9 percent below 2016’s to $62 billion, 50 percent below the peak net farm income set in 2013.
That said, “producers are substantially more optimistic about future economic conditions than during the fall and winter of 2015-2016, as evidenced by the Index of Future Expectations remaining 48 points higher than during the base period,” the report went on.
The January report represented a peak since the barometer was launched, with analysts noting at the time that the confidence boost correlated positively with the November election of US President Donald Trump.
The February report noted that possible changes in US trade policy have received a great deal of attention since the election, but Widmar said it wasn’t possible to point to any specific Trump policies that definitively contributed to the dip.
However, since the election, Trump has followed through with his plans to strike down the Trans-Pacific Partnership, and he has stated his plans to renegotiate NAFTA, which resulted in a 130-organization letter to the president defending its merits.
In the February survey, over half of respondents reported that agri exports were “very important” to the US agricultural economy and 93 percent said agri exports were “important.” In relation to their farming operations, over 40 percent of respondents indicated agri exports were “very important” and nearly 80 percent of said they were “important.”
Though the barometer fell 19 points below its record high set in January, it was still the second highest reading since data collection began in fall 2015.