By James Mintert, David Widmar and Michael Langemeier
The Purdue/CME Group Ag Economy Barometer moved higher again in February. At 140 points, producer sentiment, which is based on a monthly survey of 400 agricultural producers from across the country, reached its second-highest level in more than two years of data collection. Sentiment is also higher for the second-consecutive month, providing a strong 14-point boost to the index compared to December 2017.
While the Ag Economy Barometer reached a survey high of more than 150 points back in January 2017, it’s worth noting the difference between the January 2017 peak in sentiment and the February 2018 reading. In early 2017, favorable sentiment regarding the agricultural economy was most heavily influenced by a strong uptick in in the forward-looking measure of producer sentiment, the Index of Future Expectations, along with a more modest improvement in current conditions. More recently, however, the barometer has been strongly supported by a long-term improvement in producer sentiment regarding current conditions on their farms, along with an uptick in expectations for the future. So, a year ago the primary driver behind the barometer’s rise was better expectations for the future, whereas this year the primary driver appears to be an ongoing improvement in current conditions.
Producers optimistic about trade
On the February survey, producers were asked about their future expectations for U.S. agricultural exports. Agricultural producers remain optimistic that U.S. ag exports will remain strong over the next five years with 87% of respondents expecting exports to either remain about the same or increase. Just 13% of farmers in the survey expressed concern that U.S. ag exports will decline over the next five years, which was virtually unchanged from a year ago. The upshot is U.S. agricultural producers’ long-run expectations regarding agricultural exports have not changed over the course of the last year.
A new survey question regarding the likelihood of the U.S. withdrawing from the North American Free Trade Agreement was posed on the February 2018 survey. Producers were asked to rank, on a scale from 1 to 9, the likelihood of a U.S. withdrawal from NAFTA. The numbers were closely divided, with 39% providing a neutral rating of 5, while 34% indicated they thought withdrawal was more likely and 29% thought a withdrawal unlikely. Responses suggest there is a tremendous amount of uncertainty among producers regarding the future of NAFTA.
More profits in soybeans
Many corn and soybean producers were in the midst of finalizing 2018 cropping plans when the February survey was conducted. Producers were asked about their expectations for corn and soybean production in 2018. When asked which crop they thought would be more profitable in 2018 – corn or soybeans – a majority (71%) reported soybeans. This is a modest shift from the February 2017 survey when 67% of respondents expected soybeans to be more profitable than corn.
Producers were asked if they will plant more, fewer, or about the same number of soybeans acres in 2018 compared to 2017. The vast majority of respondents (81%) expect their 2018 soybean acreage to be unchanged from 2017, with nearly equal shares of producers expecting to plant more soybeans (10%) as those planning on planting fewer (9%) soybean acres. This was a shift from responses received when this question was posed on the February 2017 survey. A year ago, looking ahead to the 2017 planting season, 18% of producers reported they planned to increase soybean acreage, whereas 8% of respondents planned to reduce their soybean acreage.
Source: Purdue/CME Group