Farmer sentiment improved again in July as the Ag Economy Barometer increased to a reading of 153. That’s an increase of 27 points compared to June.
July was the second month in a row that the barometer increased sharply, leaving the barometer 52 points better than in May. Both the Index of Current Conditions and the Index of Future Expectations improved during July compared to a month earlier. But the big driver of the overall sentiment improvement was producer improved perspective on current conditions.
The Current Conditions Index increased 44 points in July, the largest one-month movement since the barometer’s inception. It was 57 points better than in May. For many producers the improvement in the Current Conditions Index coincided with completion of a long drawn-out spring planting season and an improvement in crop conditions. The Future Expectations Index increased to 159, 18 points better than June.
This month’s Ag Economy Barometer nationwide survey of 400 U.S. agricultural producers was conducted from July 15 through July 19, which was prior to the U.S. Department of Agriculture’s late-July announcement of the 2019 Market Facilitation Program per-acre payment rates.
Tremendous uncertainty exists regarding how many corn and soybean acres were left unplanted this year – and how many were enrolled instead in Federal Crop Insurance’s prevented-plantings program. USDA’s June Acreage report was conducted too early to adequately capture the impact of prevented plantings on 2019 corn and soybean acreage. As a result USDA resurveyed nearly all major corn and soybean states in July to better estimate actual planted acreage. But results from that survey won’t be published until Aug. 12 when the August “Crop Production” report is released. To help fill the information void in the meantime, this month’s barometer survey asked corn and soybean growers if they are taking a prevented-planting payment on any of the corn or soybean acreage they intended to plant in 2019.
Of the corn and soybean growers in our survey, 25 percent said they are filing a prevented-planting claim on some of their intended corn acreage. And 24 percent said they are filing a prevented-planting claim on some of their soybean acreage.
We then asked producers who are submitting a prevented-planting claim, what percentage of their intended acreage they will claim as prevented planting. Of the farmers filing a prevented-corn-planting claim, 61 percent said their prevented planting totaled 15 percent or more of their intended corn acreage. And 42 percent said that they didn’t plant 25 percent or more of their intended acreage.
The percentage of intended acreage not planted by soybean growers who are filing a prevented-planting claim was not as large as for corn but was still substantial. Of soybean growers filing a prevented-planting claim, 39 percent said they didn’t plant between 15 percent and 25 percent of their intended soybean acreage. But only 2 percent of producers said they were not able to plant 25 percent or more of their intended soybean acreage.
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The large improvement in farmer sentiment from June to July carried over into producer perspective regarding making large investments in their farming operations. The Large Farm Investment Index increased 25 points in July to a reading of 67 – compared to 42 a month earlier. Compared to May the index improved by 30 points, which was the largest two-month improvement in the index since data collection began in fall 2015. The increase in the investment index pushed it to more than it was at the start of this year. It’s the best reading for the index since February 2018.
The sentiment shift was also reflected in producer expectations regarding farmland values, which improved markedly in July compared to a month earlier. The percentage of producers expecting land values to increase in the upcoming 12 months increased from just 10 percent in June to 21 percent in July. That was the best percentage since February 2018. Producer longer-range view of farmland values also improved. Of those surveyed, 53 percent of producers said they expect values to increase during the next five years – compared to 45 percent who felt that way in June and 39 percent back in May.
Prospects for improving trade relations with China continue to ebb and flow. We want to gauge whether or not producers expect to see the trade dispute resolved quickly. We asked producers if they expect the dispute to be settled by July 1 in the March-May surveys, or by Sept. 1 in both the June and July surveys. Compared to the June survey, producers were less optimistic that the trade dispute will be resolved quickly. In July 78 percent of producers said they thought it unlikely the trade dispute would be resolved by Sept. 1, compared to 68 percent who felt that way in June. Just 15 percent thought it likely the trade dispute would be resolved by Sept. 1 in July compared to 32 percent of respondents who felt that way in June.
We’ve also been asking producers if they think the trade dispute with China will ultimately be resolved in a way that benefits U.S. agriculture. We’ve posed this question each month since March 2019 and the results have been interesting. In March more than three-fourths at 77 percent of producers said they expected a favorable outcome to the trade dispute for U.S. agriculture in the long run. But support for that view seemed to wane in the spring, decreasing to about two-thirds or 65 percent in May. But farmers became a bit more optimistic about the trade dispute’s outcome in June. And in July 78 percent of respondents said they expected a favorable outcome to the trade dispute for U.S. agriculture, indicating support was virtually unchanged compared to March.
Each summer we ask farmers about prospects for farming operations in their area to increase in size during the upcoming 12 months and the next five years. Farmer improved sentiment this July seemed to spill over into improved expectations for future growth opportunities. For example in July 2018 just 12 percent of respondents told us that they expected growth opportunities in the next year to increase. But in July 2019 that increased to 23 percent of farmers in our survey. Similarly when asked to look ahead five years, this year nearly half the respondents at 49 percent said they expected greater growth opportunities – compared to just 34 percent who felt that way in July 2018.
Ag-producer sentiment in July improved dramatically as the Ag Economy Barometer increased 27 points compared to June. It increased 52 points when compared to May. The sentiment shift since May 2019 was the largest two-month swing in the barometer since data collection began in fall 2015. This month’s large increase in the barometer was motivated mostly by a better perspective on current conditions; the Current Conditions Index increased 44 points compared to June.
The shift in sentiment carried over into producers having a more optimistic perspective regarding farmland values as well as whether or not now is a good time to make large investments in their farming operations. Unusually wet weather conditions this spring prevented many Corn Belt farmers from planting all their intended corn and soybean acreage. About one-fourth of corn and soybean growers in our survey said they were filing prevented-planting claims on at least some of their intended corn and soybean acreage. Survey responses indicated that prevented-planting acreage will be quite large, especially for corn. Of the farmers in our survey who filed a prevented-corn-planting claim, 61 percent said their prevented planting totaled 15 percent or more of their intended corn acreage. And 42 percent said that they didn’t plant 25 percent or more of their intended acreage. On the soybean side 39 percent of soybean growers filing a prevented-planting claim said they didn’t plant between 15 percent and 25 percent of their intended soybean acreage.
Visit ag.purdue.edu/commercialag/ageconomybarometer for more information.
James Mintert and Michael Langemeier are agricultural economists with Purdue University. Each month the Ag Economy Barometer – a collaboration between Purdue University’s Center for Commercial Agriculture and the CME Group – surveys 400 U.S. agricultural producers to discern attitudes and sentiments regarding the status of the U.S. farm economy. Each quarter 100 agribusiness leaders are surveyed to provide additional insight into the health of the agricultural economy.