US ag producers optimistic despite ‘tremendous uncertainty’

A five-point jump in sentiment is reported in February’s Purdue University / CME Group Ag Economy Barometer despite concerns about NAFTA renegotiation.

Lingering uncertainty surrounding the impact of ongoing NAFTA renegotiations have not dented improving sentiment among US agricultural producers, according to the February edition of the Purdue University/CME Group Ag Economy Barometer.

The pair’s monthly survey of 400 agricultural producers registered a five-point jump from January to 140, measured on a scale that compares current conditions with the period of October 2015 to March 2016. A measurement below 100 reflects a deterioration in sentiment, while above 100 suggests an improvement.

Purdue and CME Group highlighted that February was the second consecutive month of improving sentiment, registering the second-highest score in the two-year history of the survey and contributing to a 17-point improvement in overall sentiment since December 2017. They also highlighted the shifting balance between future expectations and current conditions in driving respondents’ overall outlook.

“A year ago, the primary driver behind the barometer’s rise was better expectations about the future, whereas this year, the primary driver appears to be an ongoing improvement in current conditions,” Purdue/CME said.

While producers reported basically unchanged expectations regarding overall exports, Purdue/CME did report a more divided set of expectations about the impact of NAFTA renegotiations. Asked to rate the likelihood of a withdrawal on a scale of 1 to 9, the survey found that 34 percent of respondents thought a withdrawal from the trade pact to be likely, 29 percent thought it unlikely, while 39 percent provided a neutral rating of 5.

“Responses suggest there is a tremendous amount of uncertainty among producers regarding the future of NAFTA,” Purdue/CME said. “Despite that uncertainty, and notwithstanding the importance of US ag exports to both Mexico and Canada, producers remain relatively optimistic about long-run prospects for US ag exports.”

Although Purdue/CME’s February survey sounded mostly notes of optimism, other observers have presented more of a mixed picture.

In Hertz Farm Management’s February edition of its monthly farmland market update, Doug Hensley, president of real estate services, said that, while the Midwest farmland market had accelerated following the seasonal slowdown usually seen around the holidays, low commodity prices continued to put pressure on many producers.

“If financial pressure continues to build, it’s our belief that there will likely be a few more sales by operating farmers that need to free up cash flow for working capital needs this year,” Hensley said. “I believe these sale-leasebacks may become a little bit more of a larger reality as we enter the 2018 crop season.”