For the first time since October 2016, the Purdue University-CME Group Ag Economy Barometer fell below 100 after dropping 25 points in April.
Issuing his breakdown of the monthly survey of farmer and rancher attitudes about their perception of the agriculture economy as it relates to their operations, Purdue Agricultural Economist James Mintert said April’s drop was the second straight month of steep declines. The index dropped to a reading of 96 for the month, effectively wiping out all improvements in farmer sentiment from the 2016 election.
April’s decline leaves the Ag Economy Barometer 72 points below its record high, established in February, he said.
CURRENT CONDITIONS, OUTLOOK DECLINE
Declines in the Index of Current Conditions and the Index of Future Expectations drove the barometer lower with the largest decline occurring in producers’ perceptions about their current situation, Mintert said.
The Index of Current Conditions declined 39 points, to a reading of 72, while the Index of Future Expectations fell 18 points to a reading of 108, he said. April’s decline pushed the Current Conditions Index 53% below its all-time high set in February.
Over the same two-month period the Future Expectations Index fell 39%, Mintert said.
In the current environment, farmers were reluctant to make large capital investments in their operations, he said. The Farm Capital Investment Index fell 16 points in April to a reading of 38, which was 34 points below its most recent high set in February.
April’s investment index stood at a level nearly equal to last year’s low of 37, set in May, when farmers were suffering from a combination of severe spring planting delays and low commodity prices, Mintert said.
CORONAVIRUS HITS HARD
Farmers’ pessimism was motivated, in part, by concerns about the effect the COVID-19 virus was having on their farms’ profitability and their operations, he said. Thirty-nine percent said they were very worried and 28% were fairly worried about the virus’ effect on their farms’ profitability this year.
More than half (54%) of the farmers responding said they anticipated applying for one of the federal government’s COVID-19 related financial assistance programs, Mintert said. When asked what their number one concern was regarding their farm and COVID-19, 42% said they were concerned about their farm’s market access, and 37% said their number one concern was financial.
Just 13% said their number one concern regarding their farm was health and safety, he said. However, 35% of this month’s respondents said they had implemented changes in how they operate their farm in response to concerns about COVID-19.
Underpinning the rise in pessimism among farmers was a precipitous decline in commodity prices, Mintert said.
From March 2–April 24, July CBOT corn futures declined 55 cents a bushel, or nearly 15%, he said. Over the same time frame July CBOT soybean futures declined 71 cents a bushel, or 8%.
CME lean hogs declined $25.50 per cwt, or 33%, and June CME live cattle declined $21.35 per cwt, or 21%.
CATTLE, BEEF RECAP
Fed cattle trading was reported Tuesday at $115 to $119 per cwt on a live basis, down $1 to $2 from last week, and at $180 to $190 on a dressed basis, steady to up $5.
The USDA choice cutout Tuesday was down $11.25 per cwt at $385.49, while select was off $14.16 at $360.02. The choice/select spread widened to $25.47 from $22.56 with 166 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Monday was $126.44 per cwt, down $0.52. This compares with Tuesday’s Aug contract settlement of $133.30, up $4.50.