U.S. ag barometer points up to start the year

by Arvin Donley
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Purdue Ag Barometer
 
WEST LAFAYETTE, INDIANA, U.S. — After trending lower in late 2017, the Purdue/CME Group Ag Economy Barometer turned higher in January. The monthly survey of 400 agricultural producers from across the United States indicated that the measure of producer sentiment climbed to 135 points at the beginning of 2018, up 9 points from December’s 126.

The uptick in sentiment was driven by an improvement in both of the barometer’s two sub-indices: the Index of Current Conditions and the Index of Future Expectations. The improvement in the Index of Future Expectations, a one-month jump of 11 points, was the most obvious driver behind the barometer’s January increase. This was the largest one-month improvement in future expectations since January 2017. The change was further supported by an increase in the Index of Current Conditions, which rose to a reading of 144 — a more modest rise of 5 points compared to December.

Each month, survey respondents are asked whether their farm operations are financially better off, worse off, or about the same. In January, 43% said their farms were financially worse off than a year ago, while 14% said their farms were financially better off.

James Mintert, director of Purdue University's Center for Commercial Agriculture and the barometer's principal investigator, said the 43% number is significant.

“To help put January's responses in perspective, the percentage of farmers who felt their operations were financially worse off reached a high of 81% in August 2016,” he said. “Since April 2017, the share reporting that their farms were financially worse off has consistently fallen below 50%. The reduction has been an important driver of the ongoing improvement in the Index of Current Conditions.”

This month’s survey provided the first opportunity to gauge producers’ perception of the Tax Cuts and Job Act of 2017 on their farming operations and their families’ tax obligations. Responses indicated that, although there is still a great deal of uncertainty regarding the tax bill’s expected impact, more farm operators expect the tax bill to be beneficial to their farming operations and to lower their families’ taxes than expect a negative impact and higher taxes.

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