Farmers Feel Good Today, Worry About Future

Producers’ optimism about current economic conditions has remained strong, while optimism about the future has faded to a 14-month low.

The Purdue/CME Group Ag Economy Barometer declined for the second consecutive month in December, drifting to a reading of 126.

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.

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.

In 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. 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.

Two specific survey questions capture the recent erosion in producers’ forward-looking sentiment. The share of producers expecting “better” financial conditions for their farms fell to 20 percent in December, while the share expecting “worse” financial conditions climbed to 30 percent. Both of these sentiment measures are at the most extreme levels recorded in over a year. Compared to a year earlier, the percentage of producers expecting their farms to be worse off one year ahead rose to 30 percent from 23 percent, and the percentage of producers expecting their farms to be better off one year ahead declined from 32 percent to 20 percent.

Source: Purdue/CME Group