Producers Feel Better About Current Conditions

The Purdue/CME Group Ag Economy Barometer turned higher in July after several months of stagnation. The index of agricultural producer sentiment, based on a monthly survey of 400 agricultural producers from across the U.S., reached 139 in July—its highest level since January 2017 and its second-highest level since data collection began in October 2015.

Sentiment this summer among the nation’s agricultural producers is markedly more positive than during summer 2016, when barometer values ranged from the mid-90s to the low 100s.

The increase in the barometer was underpinned by an improvement in producers’ perceptions about current conditions in the ag economy. The Index of Current Conditions rose to 142 in July, up 10 points from June. That is a 24-point increase since January, when the barometer peaked.

Producers also indicated in July they were more optimistic about the future. The forward-looking measure of sentiment, the Index of Future Expectations, climbed 7 points in July to 138. Still, the future index remains below its peak level of 169 in January.

Over a period of several months, a fundamental shift has taken place with respect to the primary drivers of producer sentiment. In the fall of 2016 and in early 2017, improvements in farmer sentiment were motivated primarily by producers’ more optimistic views of the future. Since February, however, future expectations have trended sideways. In contrast, the index that measures current conditions has improved steadily since last summer.

The current conditions index has increased in nine out of the last 11 months, climbing by 62 points from last summer to July.

Among drivers in producers’ perceptions of current conditions is a more optimistic view of key commodity prices. In July, it was clear that a much larger share of producers expect to see higher corn, soybean, and wheat prices in the year ahead than on prior surveys.

Producers indicated that not only do they expect higher commodity prices 12 months from now, but they are also more optimistic about near-term price movement. In July, 45 percent of respondents thought a corn rally above $4.25 per bushel was possible, a substantial increase compared to earlier this year.