Purdue Survey Finds Farmers Less Bullish

Following three months of strong gains, the Purdue University/CME Group Ag Economy Barometer shifted course in February, declining to a reading of 134, compared with 153 in January.

A survey of farm and ranch attitudes about the economy and their outlook about operating within the economy is done monthly and graphed for easier viewing.  It is conducted by Professors James Mintert, David Widmar and Michael Langemeier.

The barometer fell 19 points below its record high of 153 set in January it still was the second highest reading since data collection began in the fall of 2015, a release on the barometer reported.

The decline in producer sentiment from January was reflected in reduced optimism about current economic conditions and lowered expectations about the future, the release said.  However, despite the February decline, it’s clear producers remain more optimistic than in October as their confidence about the value of farmland as an investment remains strong.

 

CURRENT VS FUTURE CONFIDENCE

 

There are two component indices of the Ag Economy Barometer, the Index of Current Conditions and the Index of Future Expectations.  Both backed off from their January levels, the report said.

The Index of Current Conditions was 105 in February, down from 118 in January, and the Index of Future Expectations dropped 21 points from its January record of 169, the report said.  This index suggests producers feel conditions this winter are only slightly better than during the barometer’s base period of October 2015 through March 2016.

In contrast, producers are substantially more optimistic about future economic conditions than during the base period, the report said.  This is evidenced by the Index of Future Expectations remaining 48 points higher than during the base period.

 

CONCERNS REFLECT OTHER MEASURES OF CONDITIONS

 

The concern producers expressed about current economic conditions was consistent with other measures of conditions in the farm economy, the report said.  During the USDA’s annual Agricultural Outlook Forum in February, the USDA projected net farm income this year will fall about 9% below 2016’s to $62.3 billion, which would be about 50% below the 2013 peak of $123.8 billion.

When asked about the future of the overall agricultural economy, 52% of respondents expected financially “bad times” over the next 12 months, compared with 42% of respondents who said they expected financially bad times over the next five years, the report said.

Moreover, despite the fact that both measures have improved since October, it’s clear that the late-fall/early winter shift in producer perspective regarding economic conditions can best be described as an improvement in sentiment regarding a challenging operating environment.

Producer survey responses indicated a small improvement in sentiment since fall as fewer numbers expect farmland values to decline and more expect them to increase, the report said.

 

CASH CATTLE QUIET

 

No trading was reported in cash cattle markets Monday.

Cattle traded last week $1 per cwt lower than the previous week at mostly $124 to $125 on a live basis.  However, some traded late at $126 to $127 in Nebraska, steady to up $1.  Dressed-basis trades came in at $200 to $202, versus $200 to $201 last week.

Average fed cattle exchange auction prices Wednesday were $1.31 per cwt lower at $123.68, versus $124.99 a week earlier.

The USDA’s choice cutout Monday was up $0.72 per cwt at $220.55, while select was up $1.34 at $212.33.  The choice/select spread narrowed to $8.22 from $8.84 with 95 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Friday was $127.09 per cwt, down $0.13.  This compares with Monday’s Mar settlement of $128.60, up $1.12.