Ag Economy Barometer drops 16 points in November 2020

The Purdue University-CME Group Ag Economy Barometer fell 16 points from a month earlier in November to a reading of 167. Although this month’s reading was nearly equal to the pre-pandemic high set back in February, it was 9% lower than the sentiment reading taken just two weeks prior to the 2020 elections.

The decline in the Ag Economy Barometer was the result of weakened expectations for the future on the part of agricultural producers, as the Index of Future Expectations declined. On the other hand, farmers perception of current conditions on their farms actually improved and farmers remained relatively optimistic about making large investments in their operations.

Farm machinery

When asked about their plans with respect to farm machinery purchases, survey respondents pulled back somewhat in November compared to October. In this month’s survey:

• 10% of farmers said they planned to increase their farm machinery purchases compared to a year earlier, down from 14% who planned to increase purchases back in October.
• the percentage of farmers planning to keep their machinery purchases even with a year ago fell from 53% in October to 50%, while the percentage of respondents planning to reduce their purchases rose from 33% to 40%.

Farmland values

Consistent with the decline in future expectations among survey respondents, there was a softening in producers’ longer-term views on farmland values. In particular, the percentage of producers expecting to see farmland values rise over the next five years declined from 59% in October to 54% in November.

Trade

Farmers’ attitudes regarding the trade dispute with China have changed over the course of 2020. Back in January and February, 80% of survey respondents said they expected to see the trade dispute with China be resolved in a way that benefits U.S. agriculture. Optimism about the trade dispute started to fade last spring with approximately two-thirds of respondents during the spring quarter still expecting a favorable outcome. In November, this dropped to 50%. In addtion, 44% of respondents said they think it’s likely that China will fulfill the Phase One Trade Agreement requirements, down from 59% a month earlier.

Farm policy

Several new questions regarding whether they expect to see changes to regulations, taxes, and other aspects of the agricultural economy in the next 5 years, were included on both the October and November surveys. Comparing results from October to November, far more producers in November said they expect to see:

1. environmental regulations impacting agriculture to tighten over the next five years;
2. higher income tax rates for farms and ranches;
3. higher estate tax rates for farms and ranches;
4. less government support for the U.S. ethanol industry and
5. a weaker farm income safety net provided by U.S. government program policies.

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