U.S. producers optimistic but NAFTA worries loom

by Susan Reidy
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Purdue Feb Ag barometer
 
CHICAGO, ILLINOIS, U.S. — While producer sentiment increased for the second consecutive month, concerns linger over a possible U.S. withdrawal from the North American Free Trade Agreement (NAFTA), according to the Purdue University/CME Group Ag Economy Barometer.

The barometer, which is based on a monthly survey of 400 U.S. agricultural producers, read 140 in February, a five-point increase from January’s 135 reading.

Since December 2017, the barometer has made a 14-point jump. February was the second highest reading since data collection started in 2015.

The drivers of sentiment have shifted since the barometer hit a survey high of more than 150 points back in January 2017, said James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.

James Mintert director of Purdue University's Center for Commercial Agriculture
James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.

“In early 2017, producer sentiment was largely driven by an uptick in the future-looking measure of producer sentiment, the Index of Future Expectations,” he said. “More recently, the barometer’s upturn has been driven in part by a shift toward more positive sentiment regarding current farm financial conditions, as measured by the Index of Current Conditions.”

Researchers asked agricultural producers about the likelihood of the U.S. withdrawing from NAFTA. The most common response (39%), on a scale of 1-9, was a neutral rating of 5, while 34% said they thought a U.S. NAFTA withdrawal was likely. About 29% thought a withdrawal was unlikely.

“Taken as a whole, the February survey indicates that producers are really uncertain about the future of NAFTA,” Mintert said. “But despite the uncertainty surrounding NAFTA, producers remain optimistic about the future of U.S. agricultural exports.”

A full 50% of responding producers said they expect U.S. agricultural exports to increase over the next five years, while another 37% said they expect exports to remain about the same. Only 13% said they expect U.S. agricultural exports to be lower five years from now.

In addition to trade, February’s survey asked producers about their expectations for corn and soybean production in the 2018 cropping year. A majority — 71% — said soybeans would be more profitable than corn, up 4% from the number of respondents who expected soybeans to be more profitable when surveyed in February 2017.

Despite expectations that soybeans will be more profitable, 81% of those surveyed said they expect their soybean acreage in 2018 will be unchanged. Only 10% expect to plant more soybeans than a year earlier. This differs from the February 2017 survey, when 18% of producers reported they expected to increase their soybean acreage.

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