The Purdue University/CME Group Ag Economy Barometer dropped seven points in January to a reading of 167, according to a release from Purdue Ag Economist James Mintert.
The Ag Economy Barometer is calculated each month from 400 US agricultural producers’ responses to a telephone survey. This month’s survey was conducted from Jan. 18-22.
CURRENT-CONDITIONS INDEX ABOUT STEADY
While the Index of Current Conditions remained relatively flat, down 3 points to a reading of 199, the Index of Future Expectations fell 10 points to a reading of 151.
Since its peak in October 2020, the Ag Economy Barometer has fallen 9%, attributable to weaker expectations for the future. The Index of Future Expectations has fallen 19% since October, while the Index of Current Conditions rose 12% over the same time period.
Ongoing strength in the Current Conditions Index appears to be driven by the ongoing rally in crop prices, while the deterioration in the Future Expectations Index seems to be motivated by longer-run concerns about policies that could affect US agriculture in the future.
SHORT-TERM EXPECTATIONS GROW
Producers are becoming more optimistic about short-term expectations for their farms’ financial performance, with nearly one-third expecting better financial performance in the coming year compared with 2020. When asked about the size of their operating loan, 17% of respondents expected their loan size to increase this year, and, of those, 20% said the increased loan size is because of carrying over unpaid operating debt from the previous year.
That implies that 3% to 4% of those surveyed were suffering financial stress. However, that is down from 5% to 6% of farms identified as suffering financial stress one year ago.
Producers continued to think now is a relatively good time to make large investments in their farming operations. The Farm Capital Investments Index held strong at its record high of 93 for the past two months.
The percentage of farmers expecting to increase their machinery purchases also held at its highest level over the last year of 15%.
Farmers also remained bullish about short-term farmland values and cash rental rates. In January, 43% of respondents said they expected farmland values to rise over the next year (up 8 points from December) and 27% said they expected cash rental rates to rise in 2021 (up 9 points from last month).
Farmers’ weakening expectations for the future appeared to be motivated by concerns about several policy issues. Confidence that on-going trade dispute with China will be resolved in a way that favors US agriculture has waned, falling 12 points to 38%.
There also was concern about possible changes in environmental policies with 83% expecting more regulations under the new administration (up 42 points since October).
CATTLE, BEEF RECAP
Fed cattle trading was reported last week at $110 to mostly $113 per cwt, up $1 to $2 from the previous week. Dressed-basis trading was seen at $177 to $178 per cwt, up $5.
The USDA choice cutout Tuesday was up $1.08 per cwt at $236.76, while select was off $0.55 at $225.04. The choice/select spread widened to $11.72 from $10.09 with 74 loads of fabricated product and 18 loads of trimmings and grinds sold into the spot market.
The USDA reported Tuesday that basis bids for corn from livestock feeding operations in the Southern Plains were unchanged at $1.00 to $1.25 a bushel over the Mar CBOT futures contract, which settled at $5.43 a bushel, down $0.06 1/4.
The CME Feeder Cattle Index for the seven days ended Monday was $136.40 per cwt, down $0.03. This compares with Tuesday’s Mar contract settlement of $139.12 per cwt, up $1.20.