Sentiment among agricultural producers weakened slightly in February compared with a month earlier, according to the monthly Purdue University Ag Economy Barometer.
The barometer weakened slightly in February, declining seven points to a reading of 136, compared with 143 a month earlier, a release by Purdue and the CME Group and authored by Agricultural Economists James Mintert and Michael Langemeier, said. The modest decline puts the barometer back near levels observed in October and November and just four points below the level of February 2018.
ECONOMIC CONDITIONS WEIGH HEAVILY
The downward shift in the barometer primarily was the result of weakness in producers’ perception of current economic conditions on their farms as the Index of Current Conditions fell 13 points to a reading of 119 from 132 in January to 119.
Producers’ expectations regarding future conditions also weakened, but the decline was just three points, falling from to 145 in February from 148 in January.
The decline in producers’ perception of current conditions on their farms spilled over into their evaluation of whether now is a good time to make large investments in machinery and buildings as the Large Farm Investment Index dropped 12 points below a month earlier to a reading of 50 from 62 in January. The decline put the index back near its December level of 51, suggesting the positive effect of the second round of Market Facilitation Program payments on producer attitudes eroded quickly.
TARIFF WAR EFFECT
Although producers’ perspective on making large investments fluctuates from month-to-month, when examined from a longer-term perspective it appears that farmer attitudes toward making investments in machinery and buildings has deteriorated since the tariff battles erupted last summer. Looking at the Large Farm Investment Index from January-June, before the effect of the trade disputes disrupted commodity markets, it averaged a reading of 65. In contrast, the investment index averaged just 53 from July through February 2019.
Compared with responses from a year ago, fewer farmers expected their operation to grow in the future, which could be a sign of increasing financial stress among farms in the survey.
FARMLAND SENTIMENT UP
At the same time, however, there were some signs of optimism. Sentiment regarding longer-term prospects for farmland values actually improved compared with January and the percentage of farmers that said they viewed farmland as a good long-term investment rose for the fourth straight month while the percentage of farmers who viewed farmland as a poor investment declined for the third month in a row.
Producers also were more optimistic about growth prospects for US agricultural exports.
The mixture of negative and positive views regarding current and future economic conditions is indicative of the amount of uncertainty about near-term and future prospects among producers. An indication of this could be seen when producers were queried about risks they face.
When asked what risk was most critical to their farming operation, producers overwhelmingly chose marketing over financial and production risk, which is indicative of their uncertainty regarding the commodity price outlook.
CATTLE, BEEF RECAP
Cash cattle trade was reported at $128.50 per cwt on a live basis this week and at $203 to mostly $205 dressed versus $128 and $205 last week.
The USDA choice cutout Tuesday was up $0.49 per cwt at $224.04, while select was up $0.58 at $217.79. The choice/select spread narrowed to $6.25 from $6.34 with 95 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Monday, was $139.63 per cwt, up $0.04. This compares with Tuesday’s Mar contract settlement of $140.87, down $0.32.