Report shows low commodity prices weighing on U.S. producers

by Eric Schroeder
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The Index of Current Conditions fell to 80 in August from 93 in July, while the Index of Future Expectations dropped to 102 from 121.
 
CHICAGO, ILLINOIS, U.S. — Declining commodity prices weighed on U.S. farmer sentiment during August, according to the Purdue University/CME Group Ag Economy Barometer. Producer sentiment fell 17 points between July and August to 95, the largest one-month decline since November 2015.

The Purdue University/CME Group Ag Economy Barometer is a nationwide measure of the health of the U.S. agricultural economy. On the first Tuesday of each month, the Ag Economy Barometer provides a sense of the agricultural economy’s health with an index value. The index is based on a survey of 400 agricultural producers on economic sentiment each month.

The Index of Current Conditions fell to 80 in August from 93 in July, while the Index of Future Expectations dropped to 102 from 121.

“This was in sharp contrast to July when farmers’ optimism about future prospects pushed the barometer up, despite their concerns about current economic conditions,” said Jim Mintert, the barometer’s principal investigator and director of Purdue’s Center for Commercial Agriculture. “Farmer sentiment in late spring and early summer was buoyed by a spring rally in key commodity prices, but near-ideal growing conditions for corn and soybeans this summer helped push yield prospects up and crop prices down sharply.”

David Widmar, a senior research associate who works on the barometer, said tighter operating margins from expected record corn and soybean yields this fall are leading to adjustments in production costs.

“What is somewhat surprising is that more producers expect input prices to rise in 2017 than decline,” Widmar said. “This was especially true for crop protection products, as nearly one-third of respondents expected prices to increase for herbicides, insecticides and fungicides. The long-term trend for crop input prices to rise seems to be leading to skepticism regarding prospects for input prices to decline, despite the lack of profitability among crop producers.”

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