The Purdue/CME Group Ag Economy Barometer is unchanged for May and has hovered in the same range for five of the last six months.
The latest reading of the Purdue/CME Group Ag Economy Barometer – which is based on a monthly survey of 400 agricultural producers from across the country – was 130. The producer sentiment index remains considerably stronger than both last fall and a year ago.
While the broad measure of agricultural producer sentiment was unchanged, the Ag Economy Barometer’s two sub-indices diverged in May. Producers’ forward-looking expectations, as measured by the Index of Future Expectations, improved for the second month in a row, rising to 136 from 132. Conversely, the Index of Current Conditions fell to 117, a 10-point decline from its April reading. Similar to the broad Ag Economy Barometer, both sub-indices are substantially higher than a year ago, indicating producers are more optimistic about current conditions and in their expectations for the future.
Farmland value optimism
Agricultural producers are surveyed quarterly regarding their expectations for farmland value changes. The May results:
- 19% of respondents thought farmland values in their area would be higher in 12 months than currently
- 30% of producers surveyed said they expect farmland values to decline over the next year.
This is the second quarter in a row that the percentage of producers expecting lower farmland values in the year ahead declined. Interestingly, reviewing results for the eight times this question has been posed - starting in November 2015 - there was only one survey period - July 2016 - when producers were more optimistic about farmland values in the year ahead than they were in May 2017.
To gain more insight into producers’ long-term perspectives on farmland values, a new question was included on the May survey. It asked farmers about their expectations for farmland values five years ahead. The answers:
- 40% of respondents said they expect farmland prices in their area will be higher in five years than they are today. That figure is more than double the percentage of producers expecting higher prices one year out.
- 16 percent of respondents expect farmland values in five years to be lower than today, which is about one-half of the share of producers expecting lower prices in 12 months.
- Looked at another way, more than 8 out of 10 producers surveyed – 84% - expect farmland prices five years from now to be either the same as or higher than today.
Trade was a key source of debate during the 2016 elections and continues to be a priority for the current administration. In previous Ag Economy Barometer surveys, 93% of respondents rated agricultural exports as important to the agricultural economy and 80% of producers rated agricultural exports as important for their own farms. On the May 2017 survey, producers were asked specifically about their perspectives regarding the North American Free Trade Agreement (NAFTA). An overwhelming majority, 83%, of producers reported they were in favor of renegotiating NAFTA.
When asked to share their perspectives regarding the likely outcome of a renegotiated NAFTA, 63% of respondents thought it was likely the outcome would be beneficial for the U.S. economy (providing a rating of six or higher on a nine-point scale where one was unfavorable and nine was favorable). However, the single most common response to this question from survey respondents - 25% - was an expectation that the outcome from renegotiating NAFTA would be neither favorable or unfavorable, providing a rating of five on the nine-point scale. Thinking more specifically about the impact on agriculture, 61% of respondents thought the outcome of a renegotiated NAFTA agreement would be beneficial for U.S. farmers.
Source: Purdue/CME Group Ag Economy Barometer