After rising sharply for two straight months, the Ag Economy Barometer weakened significantly in August falling back to a reading of 124, down 29 points from a month earlier and slightly below the June reading of 126.
The monthly Ag Barometer is a joint venture of Purdue University and the CME Group and is the product of several sub-barometers that measure producer attitudes about current and future economic conditions. This month’s nationwide survey of 400 US agricultural producers was conducted from Aug. 12 through 20 with virtually all responses coming after the Aug. 12 USDA Crop Production report.
CURRENT CONDITIONS, FUTURE EXPECTATIONS DOWN
The barometer’s decline was attributable to declines in the Index of Current Conditions, which dropped 19 points from the previous month, and especially the Index of Future Expectations, which fell 34 points below its July reading.
Weaker sentiment was fueled in part by crop and livestock price declines that took place in late July and early August. In particular, prices for corn and soybeans fell sharply as crop conditions improved and USDA released larger-than-expected production estimates in the August Crop Production report.
INVESTMENT OPTIMISM DOWN
Producer concerns about the future of the farm economy led to a more negative outlook on the advisability of making capital investments in their farming operation and on their short-run farmland value outlook.
The Farm Capital Investment Index fell to a reading of 56 in August, 21 points lower than a month earlier, but still well above readings from June (42) and May (37), as farmers’ weaker expectations for future economic conditions made them less inclined to believe now is a good time to make large investments in buildings and farm machinery.
FARMLAND VALUE OUTLOOK SOFTER
Producers’ short-run expectations for farmland values also weakened from mid-July to mid-August. The percentage of respondents expecting farmland values to rise over the next 12 months declined from 21% in July to 12% in August and the percentage expecting lower farmland values in the upcoming year increased to 21% from 18%.
Although farmers’ short-run outlook on farmland values weakened since the last Ag Economy Barometer survey, their longer-run (five-years ahead) perspective on farmland values changed little. The percentage of producers expecting higher farmland values five years ahead declined to 50% in August from 53% in July, but the percentage of respondents expecting lower farmland values over the same period declined to 8% from 11% in July, suggesting that overall sentiment regarding the longer-term outlook for farmland values had not changed.
TRADE DISPUTE OUTLOOK DARK
Since March, the percentage of farmers who thought the US/China soybean trade dispute would be resolved quickly has risen. In May, the percentage who thought a quick resolution was unlikely hit a high of 80%.
Since then, the percentage of farmers who predicted a protracted resolution was at 71%, compared with 78% in July.
CATTLE, BEEF RECAP
Cash cattle trade was reported last week at $103 to $108 per cwt on a live basis, steady to $2 lower than the previous week. Dressed-basis trade was at $170 to $173, down $2 to $5.
The USDA choice cutout Tuesday was down $1.11 per cwt at $230.66, while select was off $0.65 at $211.62. The choice/select spread narrowed to $19.04 from $19.50 with 64 loads of fabricated product sold into the spot market.
Five heifer and no steer contracts were tendered for delivery against the Aug contract Tuesday at zero.
The CME Feeder Cattle index for the seven days ended Monday was $139.09 per cwt, down $0.09 from the previous day. This compares with Tuesday’s Sep contract settlement of $134.15, up $1.75.