Commodity prices declines, supply chain disruptions, and coronavirus concerns pressured producer attitudes in the monthly Purdue University/CME Group Ag Economy Barometer to a three-year low in April, said a Purdue University release.
The barometer recorded a reading of 96, marking the first time it has fallen below 100 since October 2016 and was 72 points below its record high just two-months ago, the release said.
The Ag Economy Barometer is based on responses from 400 US agricultural producers and this month’s survey was conducted from April 19-24.
OUTLOOK DIMMED
Producer expectations for current and future agricultural economic conditions declined sharply, the survey showed. The Index of Current Conditions suffered its largest one-month drop, down 39 points in April to a reading of 72, and the Index of Future Expectations fell 18 points to a reading of 108.
April’s decline took the Current Conditions Index 53% below its all-time high set in February, while the Future Expectations Index fell 39% over the same two-month period, the university release said.
In the April survey, 39% of respondents indicated they were “very worried,” and 28% said they were “fairly worried” about the effect of coronavirus on their farm’s profitability, and 54% said they anticipated applying for one of the federal government’s COVID-19 related financial assistance programs, the survey found.
When asked about their number one concern regarding their farm and COVID-19, 42% said they were concerned about their farm’s access to markets, 37% said financial, while just 13% said health and safety, the release said.
However, 35% said they had already implemented changes in their farm’s operations in response to COVID-19 concerns.
COMMODITY PRICE DECLINES GRAB ATTENTION
Underpinning the rise in pessimism among farmers was a swift decline in principal commodity prices over the last couple of months, the release said. Over the course of less than two months, Jul corn futures declined 15% in value, and Jul soybean futures prices fell by 8% while Jun live cattle and Jun lean hog futures prices declined 21% and 33%.
The sharp drop in commodity prices added to an already strained financial situation for many farmers, the release said. When asked to compare their farm’s expected financial performance in 2020 to 2019, 55% of respondents in the April survey said they expected a worse financial performance in 2020 than in 2019.
That pessimism trickled down to producers’ near-term farmland price expectations, the release said. When asked to look 12-months ahead, 35% said they expected farmland values to decline, up from only 13% in the January and February surveys.
However, producers’ longer-term farmland price expectations were more optimistic, the survey showed. When asked to look ahead five years, 44% said they expected higher farmland values, which was up from 41% who said they expected higher values in the March survey.
The divergence between producers 12-month and five-year expectations for farmland values suggests they viewed the current disruption in agriculture and food markets to be temporary and were looking for markets to rebound eventually.
CATTLE, BEEF RECAP
Cattle traded this week at $95 per cwt on a live basis, up $1 to down $10 from last week’s range. Dressed-basis trading was seen at $145 to $150 per cwt, steady to down $5.
The USDA choice cutout Tuesday was up $18.77 per cwt at $428.82, while select was up $33.88 at $410.54. The choice/select spread narrowed to $18.28 from $33.39 with 93 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Monday was $119.59 per cwt, up $0.68. This compares with Tuesday’s May contract settlement of $119.60, up $0.52.