Producer sentiment toward the ag economy holds steady

StartFragmentA solid 83% of producers are in favor of renegotiating NAFTA and 61% think it will be beneficial for U.S. farmers. EndFragment

Producer sentiment toward the agricultural economy held steady in May, continuing a trend of overall higher optimism, according to the Purdue University/CME Group Ag Economy Barometer.

The May barometer read 130, the same as April. Producer sentiment has hovered around the 130-point mark for five of the last six months and remains much stronger than a year ago when it read 97. The barometer is based on a monthly survey of 400 agricultural producers from across the country.

While overall sentiment remained the same, there were some changes in the barometer’s sub-indices. The Index of Current Conditions fell to 117, a 10-point decline from its 127-point reading in April. In the Index of Future Expectations, however, producer optimism increased from 132 in April to 136 in May, marking the second-consecutive month of growth. Both reflect higher levels of producer optimism than at this time in 2016.

“Agricultural producers continue to be more optimistic about future economic conditions than they were before the November elections,” said Jim Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “There are multiple reasons behind producers’ optimism. For example, in previous surveys, just over 40% of respondents said they expected a more favorable regulatory environment for agriculture in the next five years than in the recent past.”

Trade also played a key role in increasing producer optimism, Mintert said.

In the May survey, a resounding 83% of producers reported that they are in favor of renegotiating the North American Fair Trade Agreement, or NAFTA. Thinking more specifically about the impact on agriculture, 61% of respondents thought the outcome of a renegotiated NAFTA agreement would be beneficial for U.S. farmers.

“Trade was a key source of debate during the 2016 elections and continues to be a priority for the current administration,” Mintert said. “In previous barometer surveys, 93% of respondents rated agricultural exports as important to the agricultural economy and 80% rated them as important for their own farms.”

The May survey also asked producers about their sentiments toward farmland values. Forty percent said they expect farmland values to be higher in five years than they are today. That is more than double the 19% of respondents expecting higher prices in 12 months.

“Looked at another way, more than 8 out of 10 producers surveyed (84%) expect farmland prices five years from now to be either the same as or higher than today,” the report noted.

Read the full May Ag Economy Barometer report at http://purdue.edu/agbarometer. This month’s report includes additional information on what’s driving the sub-indices, sentiment toward farmland values and NAFTA expectations.

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