The Purdue University/CME Group Ag Economy Barometer rose 27 points to a reading of 183 in October and set an all-time high for the index. Farmers were more optimistic about both the future and current financial situation on their farms as the Current Conditions Index rose 36 points to a reading of 178 and the Future Expectations Index rose 23 points to a reading of 186. The Ag Economy Barometer is based on survey responses from 400 U.S. agricultural producers and was conducted Oct. 19-23.
“Since bottoming out this summer, the ag economy has rebounded sharply, and the dramatic improvement in sentiment reflects the turnaround in the farm income picture,” said James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.
Mintert was referring to a late summer/early fall rally in commodity prices combined with government program payments arising from the second round of the Coronavirus Food Assistance Program (CFAP 2), which provided a boost to many producers’ farm income. Corn and soybean prices continued to rally even though U.S. corn yields are expected to set a record high and the U.S. Department of Agriculture projects soybean yields to be the fourth highest on record.
“Together the combination of good yields, a rally in crop prices and CFAP 2 payments set the stage for an all-time high in the barometer and farmer sentiment,” Mintert said.
That optimism was reflected in many ways. Comparing their farm’s financial condition today to one year ago, 25% of survey respondents said their farm was better off financially now than at the same time last year. This was the most positive response from producers to this question in the history of the barometer survey.
The Farm Capital Investment Index also hit an all-time high in October, up 9 points from September to a reading 82. The percentage of producers expecting to increase their purchases of machinery in the upcoming year rose to 14% from 11% a month earlier, and up from just 4% back in May. Even more importantly, the percentage of respondents who plan to reduce their purchases in the next year was 33%, down from 40% in September.
The short-run outlook toward farmland values also improved. Respondents expecting land values to rise over the next 12 months rose to 27%, up from 23% in September. The percentage expecting lower farmland values declined to 9% from 12%. There was also a big shift in sentiment in the October survey regarding 2021 cash rental rates for farmland. Nearly four out of 10 (38%) respondents said they expect cash rental rates to increase in 2021. In September, just 8% of producers said they expected to see higher cash rental rates for farmland in 2021.
Producers also became more optimistic about trade with China this month. Nearly six out of 10 respondents (59%), said they expect to see China fulfill the food and agricultural import requirements outlined in the Phase One trade agreement with the U.S., compared with just 47% in September. When asked for their overall perspective on U.S. ag exports, the percentage of producers expecting exports to rise over the next five years increased to 65% in October, up from 58% in September.
Read the full Ag Economy Barometer report here. The site also offers additional resources – such as past reports, charts and survey methodology – and a form to sign up for monthly barometer email updates and webinars.
For even more information, check out the Purdue Commercial AgCast podcast. It includes a detailed breakdown of each month’s barometer, in addition to a discussion of recent agricultural news that impacts farmers. Available here.
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<p>Farmer sentiment hit a new record high in October as the Purdue University-CME Group Ag Economy Barometer climbed to a reading of 183, a 27-point increase compared to September. The reading easily eclipsed the previous record high set back in February, before the pandemic’s onset. Both of the barometer’s sub-indices also set new record highs in October. </p>
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<p>Producers were more optimistic about the future as the Index of Future Expectations rose to 186, 23 points higher than in September, and especially about the current situation, as the Index of Current Conditions reached 178, 36 points higher than in September. The Ag Economy Barometer is calculated each month from 400 U.S. agricultural producers’ responses to a telephone survey. This month’s survey was conducted from October 19-23, 2020.</p>
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<p>Unsurprisingly, given the strength in both the Current and Future Expectations Indices, the Farm Capital Investment Index also set a new record high in October with a reading of 82, nine points higher than in September. The previous record high for the investment index was 75 set back in December 2015. This month’s reading also pushed the investment index 10 points above its February 2020 reading, which was before the pandemic’s influence was felt in the U.S. agricultural sector.</p>
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<p>Responses to the follow-up question regarding farmers’ upcoming farm machinery purchasing plans were the most positive received since this question was first posed in March of this year. The percentage of producers expecting to increase their purchases of machinery in the upcoming year rose to 14 percent from 11 percent a month earlier and up from just 4 percent back in May. Perhaps more importantly, the percentage of respondents who plan to reduce their purchases in the next year was 33 percent, down from 40 percent in September, and just half what it was in May when 65 percent of respondents said they planned to reduce their purchases.</p>
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<p>Producers’ short-run outlook for farmland values also improved. The percentage of respondents expecting values to rise over the next 12 months rose to 27, up from 23 percent in September. The percentage expecting lower farmland values declined to 9 from 12 percent a month earlier. This contrasts with farmers’ expectations for farmland values over the next five years, which was virtually unchanged compared when compared to their views in September. </p>
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<p>There was a big shift in sentiment evident on the October survey regarding 2021 cash rental rates for farmland. On the October survey, nearly four out of ten (38%) respondents said they expect cash rental rates to increase in 2021, whereas, in September, just 8 percent of producers said they expected to see higher cash rental rates for farmland in 2021.</p>
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<p>Producers became more optimistic about trade with China in October than they were in September as nearly six out of 10 respondents (59%) said they expect to see China fulfill the food and agricultural import requirements outlined in the Phase One trade agreement with the U.S. A month earlier, just 47 percent of respondents said they expected to see China meet its commitments to the U.S. When asked for their overall perspective on U.S. ag exports, the percentage of producers expecting exports to rise over the next five years increased to 65 percent in October, up from 58 percent in September and very close to expectations recorded in August when two-thirds of respondents were optimistic about export growth.</p>