Improved outlook regarding trade appears to be primary driver behind higher index.
Producers’ perception of improved current conditions in the agricultural economy pushed the Purdue University/CME Group Ag Economy Barometer to all-time record highs during the month of February. The barometer, which is based on a mid-month survey of 400 U.S. agricultural producers, rose to 168 in February, an increase of one point from January and an increase of 18 points from December.
The increase was attributable to an improvement in the Index of Current Conditions, which rose 12 points from January to a reading of 154, a new record for February. Meanwhile, the Index of Future Expectations fell just four points below the record high set in January to a reading of 175.
“Almost across the board, producers indicated they were more optimistic about current conditions on their farms and in U.S. agriculture and retained most of the improvement in future expectations exhibited in January,” said James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “Optimism about the agricultural trade outlook was underpinned by recent trade agreements and appeared to be the primary driver behind the improvement in sentiment.”
To understand whether the U.S.-Mexico-Canada Agreement and the China Phase One agreements affected sentiment, producers were asked if the agreements relieved their concerns about the effect of tariffs on their farms’ income. More than three-fourths (76%) of respondents said the agreements either “somewhat” (69%) or “completely” (7%) relieved their concerns, while 17% said “not at all.”
Although some voiced concerns about the possible impact of the COVID-19 outbreak on agricultural trade in mid-February, when the survey was conducted, producers remained relatively optimistic about the resumption of trade with China.
Further, results showed that the percentage of producers expecting the soybean trade dispute to be settled soon declined to 61% in February after peaking at 69% in January. However, it was still the second most positive response since the question was first posed in March 2019. Producers also remained optimistic that the trade dispute will be resolved in a way that’s favorable to U.S. agriculture, with 80% expecting an outcome that is ultimately positive for U.S. agriculture.
Still, as the coronavirus footprint continues to expand, Mintert said it remains to be seen whether the outbreak will affect farmer sentiment at home.
Specific to farming operations, respondents’ expectations for an improvement in farmland values also rose to an all-time high in February. When asked to look ahead five years, 59% of producers said they expect farmland values to rise, up from 50% in January and the most positive response to this question since data collection began in 2015. Consistent with the improvement in the investment index, results showed that producers were also more optimistic about farmland values, with the Farm Capital Investment Index rising from a reading of 68 in January to 72 in February.
The March 16 signup deadline for producers to make their program choice under the 2018 farm bill is looming. As such, February’s survey focused on the program choice intentions of producers who grew soybeans in 2019. Four out of 10 (37%) said they were still uncertain regarding which program they would choose. Meanwhile, nearly 40% of respondents said they planned to choose the Agriculture Risk Coverage (ARC)-County program, the most popular program under the 2014 farm bill, followed by the Price Loss Coverage program at 19%, and the ARC-Individual Coverage program at 7%.