Farmers Are Becoming Less Optimistic About the Future

Dan Economy, Industry News Release

optimisticFor the second-straight month, the Purdue University/CME Group Ag Economy Barometer dipped lower, coming in with an index of 126 in December. That number was the lowest since March of last year and the second-lowest of 2017. The decline is driven entirely by producers becoming less optimistic about the future.

The Future Expectations Index was recently at 137 in October, but fell to 127 in November and dipped to 120 in December. That’s the lowest reading for future expectations since October of 2016.

The Index of Current Conditions stands in sharp contrast to the future expectations. The Index of Current Conditions measures the short-term expectations of farmers, which increased in December to 139, the highest number since July of 2017 and the second-highest number since the survey began collecting data in October of 2015.

Optimism has especially dipped in future financial expectations. The share of farmers expecting better financial conditions for their farms in the next year fell 20 percent from the previous survey, while the share of farmers expecting worse financial conditions over the coming year rose 30 percent.

From the National Association of Farm Broadcasting News Service.

Increasing Pessimism about the Future Drives Producer Sentiment Lower

by James Mintert, David Widmar and Michael Langemeier, Purdue University/CME Group

The Purdue/CME Group Ag Economy Barometer drifted lower to a reading of 126 in December, the second month in a row that the barometer has declined. The Ag Economy Barometer is based on monthly survey responses provided by 400 agricultural producers from across the U.S. December’s barometer value was the lowest reading since March and the second-lowest reading of 2017 (Figure 1).

The decline in the Ag Economy Barometer over the last two months was driven entirely by producers adopting a more pessimistic perspective regarding the future. The Ag Economy Barometer has two sub-indices, the Index of Future Expectations and the Index of Current Conditions, which provide insight into the drivers behind changes in barometer readings. December’s results revealed that producer optimism about the future declined sharply for the second month in a row. As recently as October, the Future Expectations index was at 137. The index fell to 127 in November and in December, dropped again to 120 –the lowest reading for the Index of Future Expectations since October 2016 (Figure 2).

In sharp contrast to the increased pessimism about the future, producers have become more optimistic about current economic conditions in U.S. agriculture. The Index of Current Conditions, the barometer’s measure of producers’ short-run expectations, increased in December to 139 – the highest reading since July and the second-highest reading since data collection began in October 2015.

In short, a paradox has developed in recent months. Producers’ optimism about current economic conditions has remained strong, and arguably even strengthened, while optimism about the future has faded to a 14-month low.

Read the full report.