US farmers are optimistic about the future, even though their perception of current economic conditions is down, according to a monthly survey of farmer perceptions by Purdue University.
As a result of that dichotomy of views, the Ag Economy Barometer essentially drifted sideways in December to a reading of 150, compared with 153 in November. Producers expressed less confidence about current economic conditions as the Index of Current Conditions registered a reading of 141, a decline of 12 points compared with November’s 153.
In contrast, producers’ expectations for the future remained strong as the Index of Future Expectations rose slightly, to a reading of 155 compared with 153 a month earlier.
2019 PERFORMANCE VARIED
Only 52% of farmers in the December barometer survey indicated their farm’s 2019 financial performance matched their initial budget projections. Three out of 10 said their farm’s financial performance was worse than expected, which was offset partially by nearly two out of 10, or 19%, of respondents indicated performance was better than expected.
To better assess the level of financial stress among US farmers, producers were asked in November and again in December whether they expected their farm’s 2020 operating loan to be larger than, about the same or smaller than in 2019. About one in five, or 19% to 21%, expect to have a larger operating loan.
Roughly three in 10 of those farms (29% to 30%) indicated the larger expected operating loan was that they expected to carry unpaid operating debt into 2020. Carrying over unpaid operating debt from one year to the next is a sign of financial stress, and this suggests that about 6% of farms surveyed in December were experiencing significant financial stress.
CAPITAL INVESTMENT INDEX NEAR FLAT
The Farm Capital Investment Index changed little in December compared with November with an index reading of 72, up one point. December’s index value was the highest value for 2019.
The investment index was quite volatile last year, ranging from a low of 37 in May before recovering to December’s peak of 72. December’s reading suggested that, despite the decline in the Index of Current Conditions, producer optimism was strong enough that farmers were more willing to consider making large capital expenditures on farm machinery and buildings than a year ago when the Farm Capital Investment Index stood at just 51.
CHINA TRADE OPTIMISM SLIPS
Producers remained confident that the trade dispute with China would be settled soon. Although the percentage of those indicating they expect a quick resolution slipped slightly to 54% in December from 57% in November, the percentage of producers who believe it’s unlikely the dispute will be settled soon also fell to 34% from 38%, leaving overall sentiment regarding the dispute’s resolution virtually unchanged.
Producers who felt the dispute was likely to be resolved in a way that is beneficial to US agriculture dipped to 72% from 80%. The percentage of those expecting a favorable resolution has averaged 73% since March.
CATTLE, BEEF RECAP
Cash cattle trading took place last week at $124 to $125 per cwt on a live basis, up $2 to $3 from the previous week. Dressed-basis trade happened at $198 to $200 per cwt, up $3 to $4.
The USDA choice cutout Tuesday was down $0.09 per cwt at $209.56, while select was up $0.02 at $206.82. The choice/select spread narrowed to $2.74 from $2.85 with 126 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Monday was $145.98 per cwt, down $0.55 from the previous day. This compares with Tuesday’s Jan contract settlement of $145.90, down $1.52.