Producers more optimistic in January; many expect lower taxes
Agricultural producers reported in January that they were more optimistic about the agricultural economy than a month earlier, according to the latest Purdue University/CME Group Ag Economy Barometer.
The barometer reading was 135 in January, up nine points from December’s reading of 126. The uptick was driven by increases in both the Index of Current Conditions, which climbed five points to 144, and the Index of Future Expectations, which climbed 11 points to 131.This marks the largest one-month improvement in future expectations since January 2017.
The barometer is based on a monthly survey of 400 agricultural producers from across the U.S. Each month, survey respondents are asked whether their farm operations are financially better off, worse off or about the same. In January, 43% said their farms were worse off financially than a year ago, while 14% said their farms were better off financially.
According to James Mintert, director of Purdue University’s Center for Commercial Agriculture and the barometer’s principal investigator, the 43% number is significant.
“To help put January’s responses in perspective, the percentage of farmers who felt their operations were financially worse off reached a high of 81 in August 2016,” he said. “Since April 2017, the share reporting that their farms were financially worse off has consistently fallen below 50%. The reduction has been an important driver of the ongoing improvement in the Index of Current Conditions.”
Another potential driver of producer sentiment in January was the passage of the Tax Cuts & Jobs Act of 2017. Surveyed producers were asked to rate the bill's likely impact on their farming operations as well as their families’ tax burdens. Nearly half of producers surveyed said they expect the tax bill to be beneficial to their operations, while 19% expect the bill to have a negative impact on their farming operations. The remaining 35% gave a neutral response.
When it comes to their families’ tax burdens, 43% of producers said they expect a decline, 18% expect an increase and 40% expect their tax burden to stay about the same.
“It’s possible the 40% of respondents expecting no changes in their taxes and the 35% who provided a neutral rating could reflect uncertainty regarding the specific content of the tax bill and the fact that (Internal Revenue Service) regulations implementing the tax bill have yet to be issued,” Mintert said.
Each quarter, a parallel survey gauges the sentiment of 100 agricultural thought leaders. Sentiment among thought leaders declined sharply from October’s survey, from 152 to 127. The decline in sentiment was driven, in part, by the agricultural thought leaders’ more negative perspective on current conditions versus last fall.