The latest monthly Ag Economy Barometer report from farm economists at Purdue University and global commodities and derivatives marketplace CME Group has revealed a broadly positive sentiment shift among U.S. farmers. The report’s Index of Current Conditions tied the all-time high from the previous month (an index reading of 202), as tight supplies of farm commodities have supported prices and farmland values have remained high. Farmers are also more upbeat on future prospects: the report’s Index of Future Expectations snapped a four-month downward streak, rising 16 points fo a reading of 164.
Each month, the jointly produced Purdue/CME Ag Economy Barometer synthesizes results from a telephone survey of 400 U.S. agricultural producers conducted over several days. Latest survey results were based on interviews done in late March.
“Even with a rebound in crop production in 2021, it looks like carryover supplies of corn and soybeans will remain tight, providing producers’ confidence that crop prices will remain strong this year, according to James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “A rebound in the U.S. economy this summer combined with expectations for a smaller pork supply is also providing some optimism in the livestock sector.”
Bullish on land values, capex
In March, producers continued to be relatively optimistic about making farm machinery purchases and capital investments in their farming operations. The Farm Capital Investment Index held at a reading of 88, just 5 points below its all-time high of 93. Since March 2020, when farmers’ confidence in the agricultural economy plummeted, the investment index has risen 63%.
Farmers’ upbeat views on farmland values, both in the coming year and in the next five years, continued in March. The Short-Term Farmland Value Expectations Index rose for the fourth month in a row, up 3-points to a reading of 148, and the Long-Term Farmland Value Index, matched its previous high set back in December, up 4-points to a reading of 157. Compared to the May 2020 low-point, producers’ optimism toward long-term farmland values is up 22 percent.
Producers’ perspective on their farms’ financial position continues to improve, which appears to be fueling some of the short-term optimism about farmland values and capital investments. The Farm Financial Performance Index is based on responses to a question that asks producers, “As of today, do you expect your farm’s financial performance to be better than, worse than, or about the same as last year?” In April 2020, the index hit an all-time low of 55; since that time, the index has seen a remarkable improvement, up 127 percent to a record high of 125 in March.
But not China
Notably, ongoing trade talks with China are the one area where U.S. agriculture producers are not optimistic about current or future prospects. The percentage of producers who expect the U.S. trade dispute with China to be resolved in a way that’s beneficial to U.S. agriculture peaked at 81 percent in early 2020. Since that time, the percentage of those who agree with that assessment has been in a free-fall, down just over 50 points to a reading of 31 percent in March.
This attitude mirrors farmers thoughts on whether China will fulfill its Phase One trade agreement with the U.S. In October, Purdue and CME Group found, 59 percent of producers said they expected China to fulfill its Phase One obligations; that fell to 40 percent in January, and to 35 percent in March.
Carbon capture
In a follow-up to questions on previous barometer surveys regarding carbon sequestration, approximately 30 to 40 percent of farmers in Purdue/CME Group surveys, over the last three months, say they are aware of opportunities to receive payments for capturing carbon on their farms. Among the relatively small percentage of respondents who reported carbon sequestration payment rates that were offered, approximately 80 percent of those respondents said payment rates were $20 or less per acre.
