US farmer sentiment lift after USDA report: Purdue University

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Producer sentiment regarding the state of the US agricultural economy rose for April following a multi-month slide, says analyst.

Details on producer sentiment were released as part of the Ag Economy Barometer report generated by Purdue University and the CME Group.

The slight uptick in feeling moved the setting for the benchmarking tool from 124 in March 2017 to 130 in April 2017.

The latest result is based on a monthly survey of 400 US agricultural producers, and while slightly higher than March’s reading, is still well below January’s peak of 153. When compared to a year earlier, sentiment among producers was much improved, up 23% last month from the April 2016 reading of 106.

More broadly though, agricultural producers’ sentiment since December 2016 has been notably more positive than at any other time since data collection began in October 2015, said Purdue and CME.

David Widmar, senior research associate in the department of agricultural economics with Purdue University, told us.

“We’ve seen sentiment lift and commodity prices lift off the March report from the USDA. People could breathe after we got through that.”

Corn and soy price expectations

More respondents thought that corn prices would remain below $4.25 a bushel and that soybean prices would drop below $9 a bushel than they did in January, said the report.

In addition to questions about commodity prices, the team asked about timing for a large farm investment, said Widmar. The percentage of producers saying it is a poor time to make a capital investment has dropped since August, but there has not been large variation.

“We’re kind of watching this and seeing where it plays out over the next several years – where does it settle out,” he said. “Even though sentiment has increased, we haven’t seen a huge shifts in [terms of] making capital decisions.”

Thought leaders 

In parallel to the producer survey, a quarterly survey of 100 agricultural thought leaders is also conducted by Purdue and CME. The agricultural thought leader group is comprised of agribusiness executives, agricultural lenders, commodity and farm organization leaders, as well as agricultural economists in the academic and government sectors.

Expectations regarding the farm economy’s health among the thought-leader group increased by about 12% in April compared to the previous survey conducted in January 2017. Similar to the results from the producer-driven Ag Economy Barometer Index, agricultural thought leaders’ sentiment in early 2017 is much more positive than last fall, according to the report.

Although thought leaders were more optimistic overall regarding the agricultural economy, they do not expect to see higher prices for feed grains, the group said. Compared with results collected in January, more thought that soybeans would drop in price and that corn would not see a return of prices above $4.25 a bushel.

“This group has reported an increase in sentiment and even from last year that bump we saw post-election in producers has trickled out into other sectors as well – it’s not just farmers, it’s those who work with farmers are feeling more upbeat,” said Widmar.

Year in review

Additionally, the report marks the first full year of published results for the barometer, said Widmar. The group now has several takeaways from the work done so far.

There continue to be connections between prices for feed commodities and producer sentiment, he said. “More than half the time, the directional change came from the USDA – if the USDA said corn prices are up, sentiment tracked it, and it’s an important component, but it’s not all of it – it’s not the whole story,” he added.

“Sentiment is more than just profitability, and it’s not the same as profitability,” he said. “Prices can be down but sentiment can be up.”

Additionally, the barometer is tracking when events outside of the feed or agricultural industries have a lasting influence on the sector, he said.

“Another important piece is that external events can really make a big difference in producer sentiment,” he said. “What happened following the [presidential] elections with producer farm level sentiment – that’s one of the things we wouldn’t have known without this tool.”

Overall, he said, producers have been more optimistic in 2017 than they were for 2016.  

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