U.S. ag producer sentiment rises sharply

by Arvin Donley
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Purdue University
To view the full graphic click here.
Graphic courtesy of Purdue University. 
 
WEST LAFAYETTE, INDIANA and CHICAGO, ILLINOIS, U.S. – Producer sentiment about the U.S. agricultural economy soared on the heels of November's presidential election, according to the December Purdue University/CME Group Ag Economy Barometer report released Jan. 10.

The December survey results landed the barometer at an all-time high reading of 132 — a 16-point jump from the November survey. The barometer is based on a monthly survey of 400 U.S. agricultural producers.

Producer optimism surrounding both current conditions and, especially, future expectations drove the increase. The Index of Current Conditions rose to 102 from November's 87, while the Index of Future Expectations increased from 130 in November to 146 in December.

"Looking back at the data from the last several months, it's apparent that we've seen a big swing in producers' expectations about the future," said James Mintert, barometer principal investigator and director of Purdue's Center for Commercial Agriculture. “Although both the Current Conditions and Future Expectations Indices increased the last couple of months, it was the increase in the Index of Future Expectations, which jumped 51 points since October to reach an all-time high in December, which triggered the sharp rise in the barometer."

Purdue University
To view the full graphic, click here.
Graphic courtesy of Purdue University. 
 
Producers' improving sentiment doesn't seem to be driven by changes in corn and soybean prices, Mintert said. For example, March 2017 CBOT corn futures were slightly weaker during the November and December survey periods than during the October survey. On the soybean side, January 2017 CBOT futures were unchanged in November and only slightly stronger in December than those during the October survey collection period.

Additionally, improved economic sentiment extends beyond just agriculture, said David Widmar, senior research associate and leader of research activities for the barometer. In October and December, producers were asked about their expectations for the broad U.S. economy and the results were surprising.

"The contrast in sentiment from the October survey — three weeks prior to the U.S. elections—and the December survey — five weeks after the elections — is remarkable," Widmar said.

When asked in the October survey about their expectations for the U.S. economy over the next 12 months, only 13% of respondents said they expected it to expand, while 23% said they expected it to contract. In the December survey, half of the respondents expected economic expansion and only 13% expected contraction in the year ahead.
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