WEST LAFAYETTE, INDIANA, U.S. and CHICAGO, ILLINOIS, U.S. — Ag producer sentiment rebounded in June as U.S. farmers expressed a more optimistic outlook toward the future of the ag economy. The Purdue University/CME Group Ag Economy Barometer, based on a mid-month survey of 400 agricultural producers across the United States, increased to a reading of 126 in June, up 25 points from May.
Increases also were seen in both of the barometer’s sub-indices. While the Index of Current Conditions only saw a modest increase, up 13 points from May, to a reading of 97, the Index of Future Expectations jumped 33 points, to a reading of 141 in June.
“This year farmers have faced an extremely wet planting season and uncertainty surrounding trade discussions,” said James Minert, the barometer's principal investigator and director of Purdue University's Center for Commercial Agriculture. “However, a crop price rally coupled with USDA’s announcement of its 2019 MFP program and Congress’ passage of the Disaster Aid Bill made farmers more optimistic. While this combination provided a boost to a struggling ag economy, it remains a challenging economic environment for farmers.”
In June, the prospect of large prevented plantings, along with concerns that delayed planting of corn and soybeans would impact yields, led the USDA to forecast tighter supplies than previously expected. Supply concerns were a key factor behind a rally in corn and soybean prices that took place from mid-May to mid-June when the June barometer survey was conducted. For example, nearby CBOT corn futures prices were up 28% and nearby CBOT soybean futures prices were up 12%, both compared to their mid-May lows. The USDA also announced it would provide another round of MFP payments on planted acres of a large number of covered crops, including corn and soybeans.
In light of the announcement and the historic corn and soybean planting delays this spring, producers who planted corn or soybeans in 2018 were asked whether the MFP announcement affected their decision to take or not take a prevented planting payment this year. About 10% of corn and soybean producers said the announcement did impact their prevented planting decision making and one out of five farmers within that group said they intended to plant more corn, while one out of 10 farmers within that group said they intended to plant more soybeans, because of the MFP program.
One of the big question marks in the 2019 outlook is how many acres will be enrolled in the Federal Crop Insurance's prevented planting program. Nearly one-third (32%) of corn/soybean farmers in the survey said they intended to take prevented planting payments on some of their corn acres and of those who intend to take a prevented planting payment, just over half (51%) said they intend to take prevented planting on more than 15% of their intended corn acreage.
Lastly, farmers were slightly more optimistic regarding the resolution and impact of the ongoing trade dispute with China. From March through May, the percentage of producers expecting a beneficial outcome to the trade dispute declined to 65% from 77%; yet, on the June survey, that percentage rose slightly to 69%. Farmers also were asked whether they believe the dispute will be resolved by Sept. 1. In mid-June, 32% of producers expected it to be settled by early September, whereas just 20% expected the dispute to be settled by July 1 when this question was posed in mid-May.