Trade fears dragged producer sentiment in April: Purdue/CME

A 10 point drop since the prior iteration of the pair’s monthly survey of sentiment among 400 US agricultural producers reveals growing worries regarding the future of China’s purchases US soybeans.

The undercurrent of concern among US agricultural producers in March over the potential impact of trade conflict with China became more pronounced in April, according to Purdue University and the CME group.

The latest edition of the pair’s monthly survey of 400 agricultural producers, released last week, provided a reading of their sentiment in comparison to a baseline period of October 2015 to March 2016. A score above 100 indicates an improvement in conditions compared to that period and a score below 100 suggests a deterioration.

In April, the main Barometer index fell to 125 from a reading of 135 in March, according to the report. That finding represented a 10 percent drop from the previous survey and a 15 point drop from February, when the pair’s report on the survey highlighted that that producers’ optimism persisted despite concerns of how NAFTA renegotiation would impact agricultural trade flows.

Distinct indices gauging expectations of current and future conditions also each dropped by about 10 points from March’s reading last month, according to the report.

The deterioration in sentiment was most pronounced regarding soybeans, according to Purdue and CME, which attributed the change, in part, to escalating trade tensions between the US and China.

China is the destination for about 30 percent of US soybean exports. Last week, USDA economist Fred Gale told Agri Investor that the prospect of ongoing trade dispute with the United States could inspire China to encourage more overseas investments in the crop.

“The share of producers expecting soybean prices to decline in the year ahead rose to 27 percent in April, compared with just 15 percent who said they expected prices to decline when the same question was posed back in January,” Purdue and CME wrote.

Regarding farmland prices, Purdue and CME reported that respondents’ perspectives on the likely path ahead for land values during the next 12 months and the coming five years had both gotten more pessimistic in April.

Cody Dahl, vice president for acquisitions and strategy at Boston-headquartered private equity firm AgIS Capital, told Agri Investor last week that returns on row crop US farmland were unlikely to rise above 8 percent over the next half decade.

“Concerns about commodity prices appeared to have some spillover impact on producers’ views of farmland prices, as the percentage of producers expecting farmland values to increase over the next 5 years declined from 53 percent in February to 46 percent in April,” wrote Purdue and CME.