Producer sentiment moderates, continues to favor livestock
WEST LAFAYETTE, IN -- Farmer sentiment toward the agricultural economy improved slightly in September as fall harvest kicked off, according to the latest reading of the Purdue/CME Group Ag Economy Barometer.
The barometer read 101 for the month of September, up just six points from the August reading of 95. The current reading is well below the barometer's peak of 112 in July.
Survey respondents remained more optimistic about the future conditions in the livestock sector than crops, but most said they don't actually expect widespread good times in either sector, said Jim Mintert, the barometer's principal investigator and director of Purdue's Center for Commercial Agriculture.
"Interestingly, the gap between expectations for good times in crops versus livestock has narrowed quite a bit since late 2015," he said. "For example, in fall 2015, the percentage of respondents expecting good times in livestock over the next five years exceeded the same reading for crops by 11 percent. In the period between July and September 2016, the average gap was just 7 percent, suggesting that expectations of strong profits in livestock production have diminished."
Another key takeaway from the September survey is that farmers plan to store more of their crops at harvest than is typical - something Mintert said is likely attributable to farmers' reluctance to sell their crops at prices that are sharply lower than earlier this summer.
Producers surveyed indicated that they have been less aggressive than usual in pricing the 2016 crop. More than 40 percent said that they have priced a smaller portion of this year's crop than they would in a typical year.
"These results suggest not only that demand for storage this fall will be very strong but also that producers expect positive storage returns for their fall 2016 crops," Mintert said.
The barometer's Index of Current Conditions and Index of Future Expectations offered a more detailed view of what is driving farmer sentiment. While both indices increased in September, the difference between the two tells more of the story, Mintert said.
The Index of Future Expectations came in at 109 in September, nine points higher than the base-period value of 100, and is the second-highest reading observed since the start of 2016. The Index of Current Conditions, however, read 83 in September, and was the fourth-lowest value since data collection started in fall 2015.
"What this tells us is that agricultural producers are pessimistic about the current conditions in agriculture, but they continue to express some optimism about future long-term economic prospects," Mintert said.
The Ag Economy Barometer is based on monthly surveys of 400 U.S. agricultural producers. Read the full September report, find additional resources and sign up to receive monthly barometer email updates at http://purdue.edu/agbarometer.