Corn planting photo SCOTT OLSON/GETTY IMAGES
As planting cranks up for 2017, a survey indicates increasingly favorable expectations by producers about the future.

Amid the gloom, an uptick in optimism

The biggest contributor to the large uptick in optimism since October has been producers’ increasingly favorable expectations about the future.

However gloomy things may be in the ag sector from the standpoint of crop prices, a January survey of producer sentiment about the outlook for the agricultural economy showed optimism up significantly from the previous October.

The Ag Barometer produced by Purdue University and the CME Group reached 153 in January, up from a previous high of 132 in December, and 62 points higher October 2016. The monthly survey samples 400 U.S. agricultural producers, and a quarterly in-depth survey collects the economic expectations of 100 “agricultural thought leaders,” including lenders, retailers, consultants, academics, and agribusiness professionals.

“The biggest contributor to the large uptick in optimism since October has been producers’ increasingly favorable expectations about the future,” said James Mintert, principal investigator and director of Purdue’s Center for Commercial Agriculture. “This was again the case in January, but it’s worth noting that producer optimism was also supported by a perceived improvement in current conditions.” Part of that perception was driven by improvements in prices for key commodities, including soybeans, cattle, and hogs.

Another possible source of producer optimism is the potential for a new regulatory environment with the new U.S. presidential administration, said David Widmar, senior research associate and leader of research activities for the barometer. Surveyed producers were asked whether they thought regulations impacting agriculture would be more or less restrictive, or about the same, in five years; 41 percent said less, while only 29 percent said they expected regulations to be more restrictive.

“Given that regulations affecting agriculture have been increasing over time, it’s noteworthy that 41 percent of the respondents expect a less restrictive regulatory environment in five years than they face today,” Widmar said.

SCOTT OLSON/GETTY IMAGESPlanting photo

When asked to look ahead 12 months, there was a significant shift in optimism about the future among producers.—Scott Olson/Getty Images

One difference between producer and thought-leader sentiment was in expectations for new crop corn and soybean futures prices, he said. “Overall, thought leaders were a bit less optimistic than producers; fewer respondents expected new crop corn futures to reach new contract highs. A larger share of thought leaders than producers expected new futures contract lows to be set for both corn and soybeans.” There was, however, a notable difference in wheat price expectations from October to January, with one-third of January survey respondents expecting higher prices compared to just over 20 percent in October.

The high level of optimism reflected in the survey is at odds with articles in the mainstream media that paint a less-than-rosy picture for U.S. agriculture, among them the Wall Street Journal’s article, “The Next American Farm Bust is Upon Us.”

The improvement in in optimism in the Purdue/CME Group Ag Economy Barometer is tempered, the researchers say, by the fact that over half of the survey respondents felt their farm operation’s financial situation was worse off today than a year earlier and over 60 percent of respondents expected their financial condition to be worse yet 12 months from now.

But when asked to look ahead 12 months, there was a significant shift in optimism about the future among producers. In October, just 17 percent of producers expected their farm financial condition to improve in the year ahead; in January that had more than doubled to 39 percent, “the most positive response provided by producers to this question since the inception of the monthly Ag Economy Barometer surveys in 2015.”

See complete survey details at http://bit.ly/2jYI77K

 

TAGS: Management
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