Ag Economy Barometer drops 47 points in March 2020
COVID-19 impacts producers' outlook, with 62% expecting Market Facilitation Program payments in 2020.
The Ag Economy Barometer experienced the largest one-month fall in its existence in March, dropping 47 points, or 28%, from a month earlier to a reading of 121. The barometer dates to October 2015. This month’s decline in the barometer erased the sentiment improvement that took place this past fall and winter and leaves the index unchanged from its September 2019 reading.
The Ag Economy Barometer is generated each month from 400 U.S. agricultural producers’ survey responses. This month’s survey was conducted from March 16-20, 2020, as the coronavirus crisis escalated in the U.S. and around the world.
Did the Index of Current Conditions and the Index of Future Expectations drop too?
Yes, the Index of Current Conditions and the Index of Future Expectations plunged during March as both indices experienced their largest one-month declines since data collection began in 2015. The Index of Current Conditions declined 43 points and the Index of Future Expectations dropped 49 points, both compared to one-month earlier. Producers’ sentiment regarding current conditions, with a reading of 111, was the lowest observed since last September when the Index of Current Conditions stood at a reading of 100. The Index of Future Expectations reading of 126 was the lowest value for that index since August 2019.
How did producers express their concern?
First and foremost, U.S. farmers said they were concerned about how the coronavirus will impact their farms in 2020: 34% were fairly worried about the impact of the virus on their farm’s profitability this year and 40% were very worried.
An increasing number of farmers said they expect their farm’s financial performance this year to be worse than last year, at 40% in March compared to 30% in December.
The percentage of producers expecting good times in the agricultural economy in the next 12 months fell from 50% in February to 19% in March.
What about long-term business investments?
The Farm Capital Investment Index, which is focused on investments in machinery and buildings, fell 18 points to an index value of 54, its lowest reading since June 2019 when the Midwest was buffeted by too much rainfall and widespread crop planting delays.
The percentage of farmers expecting farmland values to decline in the year ahead jumped from 13% in February to 28% in March. Looking ahead 5 years, the percentage of farmers expecting farmland values to rise over that longer time frame declined from 59% in February to 41% in March, which was the weakest perspective provided by farmers on farmland values since last May.
What about the trade war with China?
The souring economic outlook flowed into the trade arena as the percentage of farmers expecting the soybean trade dispute with China to be resolved soon falling to 47% from a peak of 69% in January. This was the second month in a row that expectations for a quick resolution to the trade dispute declined.
At the same time, the percentage of producers who expect the trade dispute to be resolved in a way that’s ultimately beneficial to U.S. agriculture declined to 68% from an average of more than 80% who felt that way in January and February.
Will the federal government send aid?
More farmers said they expect to receive an MFP payment on their 2020 crop production than did a month earlier. In March, 62% of survey respondents said they anticipate USDA providing MFP payments to U.S. farmers for the 2020 crop year. That was a significant increase compared to a month earlier when just 45% of farmers said they expected to receive an MFP payment this year.