Ag Barometer Weakened in December

The Purdue University/CME Group Ag Economy Barometer declined moderately in December to 127, which was seven points below the index’s value one month earlier and nine points below October’s reading. The December 2018 barometer was virtually unchanged from December 2017 when the barometer stood at 126.

Producer perceptions have shifted in regard to both current conditions and future expectations. The December 2018 Index of Current Conditions was substantially below a year earlier, registering a year-to-year decline of 30 points. In contrast, the Index of Future Expectations was actually 15 points higher in December 2018 compared to December 2017. This divergence in perceptions has been especially notable since last spring as producers continue to exhibit more confidence in future conditions for their farms in the face of weakening perceptions regarding current economic conditions.

Producers’ interest in making large investments in their farm operations waned somewhat in December. The Large Farm Investment Index fell to a reading of 51, five points below a month earlier but still nine points higher than in September, when it reached its lowest reading of the last three years. The investment index remains well below a year ago, when it reached a reading of 70, suggesting farmers are wary of making substantial farm investments given current financial conditions on their farms.

Concerns about agricultural trade continue to dominate headlines. To track farmers perceptions about future exports, researchers have repeatedly asked farmers whether they expect U.S. agricultural exports to increase or decrease in the upcoming five years. Responses to this question became more positive from April through November 2018, but that changed on the December survey as the percentage of producers expecting exports to increase declined from 66 percent in November to 59 percent in December and the percentage expecting exports to decrease increased from 10 percent in November to 26 percent in December.