Graphic courtesy of CME Group/Purdue University.
The barometer climbed to 139 in July, breaking out of several months of stagnation that were in the range of 130 to 131. July was also the second-highest level for farmers’ sentiment since the barometer launched in October 2015. The barometer is based on a survey of 400 U.S. agricultural producers.
Overall, farmers’ sentiment this summer has been significantly more positive than it was during the summer of 2016, when the Ag Economy Barometer ranged from the mid-90s to the low 100s, said Jim Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.
Farmers are more confident in current conditions than past months, as shown by the Index of Current Conditions, which rose from 132 in June to 142 in July.
Specifically, farmers are more positive due to expectations for higher prices of key commodities. As part of the most recent Ag Economy Barometer survey, producers were asked if they anticipated higher, lower or similar prices for grain, cotton and oilseed in the next 12 months.
Of the 400 respondents, 39% said they expected to see higher prices for corn in the coming year. That compares to the 24% that was reported in the April 2017 survey and 22% in the July 2016 survey. Expectations for increases in soybean and wheat prices were nearly as strong as they were for corn, Mintert said.
The improvement in producers’ expectations for commodity prices corresponded with early summer market activity. Wheat futures prices, driven by drought conditions in the Northern Great Plains, have been the most active, but uncertainty about the corn and soybean growing seasons also has contributed to market volatility, according to the report. Corn futures prices, based on the December 2017 futures contract, traded down to a low of about $3.75 in late June 2017 to a high of more than $4.15 in early July over a span of just a few trading days. The upside price volatility appears to have helped boost producers’ price expectations.
Producers also said they were more optimistic about near-term price movement than they were earlier in the year. In July, 45% of respondents thought a corn rally above $4.25 per bushel was possible, a much higher percentage than January or April.
A new question was given to producers about whether it was more likely that December 2017 corn futures would exceed $4.25 per bushel or fall below $3.50 per bushel before this fall.
Fifty-four percent of the respondents said that the December corn futures contract price exceeding $4.25 was more likely than falling below $3.50.
While the improvement in producer sentiment is impressive, it’s important to reflect on just how gloomy commodity price expectations were last fall, the report said. In October 2016 (reported in November 2016), producers were asked about their expectations about the July 2017 corn futures contract between October and summer 2017.
One-third of producers thought a rally above $4 was possible, whereas 27% indicated a drop below $3 per bushel was possible. As it turned out, neither scenario occurred, but the December corn futures contract did trade near the higher end of the range, exceeding $3.90 per bushel In February, June and July.
The full July Ag Economy Barometer report is available here.