WEST LAFAYETTE, INDIANA, U.S. — The Purdue University/CME Group U.S. Ag Economy Barometer declined seven points in February to a reading of 136, down from 143 in January.
“Last month we saw a significant boost in optimism among agricultural producers after the announcement of the second round of MPF payments; however, it appears the positive impact eroded quickly,” said James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “Compared to responses from a year ago, fewer farms said they expect their operation to grow in the future, which could be a sign of increasing financial stress. We’re also seeing a growing number of farms concerned about marketing risk, ranking it as the biggest risk facing their operations.”
The monthly survey includes measures of producer sentiment toward current conditions and future expectations. The February survey, released on March 5, indicated both indexes declined from their January reading. Current conditions dropped 13 points, to 119 rom 132. The Future expectations saw a three-point decline to 145.
The report said ongoing tariff battles or trade wars impacted the commodity markets, causing producers to challenge whether it is the right time to make investments.
“From January 2018 through June 2018, before the trade disruptions emerged as a major market factor, the Large Farm Investment index averaged a reading of 65,” the report said. “However, since that time, the index has had an average reading of 53 points and, in February 2019 alone, the index fell to a reading of 50, down 12 points from January, as uncertainty about commodity prices continues to make farmers wary of large investments in their operations.”
When surveyed about whether producers plan to grow or increase the size of their current operations, 50% indicated they either “have no plans to grow” or “plan to reduce size.”
“In February, producers were slightly more optimistic about evaluating farmland as a long-term investment and the future growth of agricultural exports; yet, they remain concerned about risk,” the report said. “When asked what type of risk was most critical to their farming operation, producers overwhelmingly chose marketing risk (56%) over both financial (27%) and production (17%) risk, which explains their uncertainty regarding the commodity price outlook.”