Farmers Worry as Trade War Looms05/09/2018
Farmers are worried about current and future conditions of the ag industry, according to the Purdue University/CME Group Ag Economy Barometer that measures the health of the U.S. ag economy.
The most recent barometer reading fell to 125 in April, 10 points lower than a month earlier and 15 points below its February reading.
Economists discussed the survey results during a webinar.
“That puts us at the lowest level we’ve seen in a year and a half or so,” said James Mintert, director of Purdue’s Center for Commercial Agriculture.
“We’ve lost a good chunk of the optimism gained from the election, but we haven’t lost it all. We’re still well above where we were in the fall of 2016, prior to the election — an index value of 92.”
Agricultural trade worries were likely behind some of the decline in sentiment.
“There’s been a significant change in people’s expectations regarding where exports are headed,” Mintert said. “A lot of that has to deal with discussions about possible trade disruptions, especially with China and to a lesser extent NAFTA.
“It’s created some uncertainty for producers about what’s going to happen. From a long-run aspect, ag exports have grown over time. The fact that we’re seeing people expecting exports five years in the future to be smaller is significant.”
Taking A Toll
In February 2018, when asked to look ahead five years, 13 percent of producers said they expected agricultural exports to decline. When the same question was posed in April, the share of producers expecting lower exports increased to 17 percent.
The negative perspective regarding exports appeared to spill over into concerns about commodity prices. The percentage of producers expecting lower soybean prices nearly doubled from 15 percent in January to 27 percent in April.
Producers were more pessimistic about future returns for livestock producers than they were earlier in the year, as well. The percentage of producers expecting pork industry expansion in the year ahead declined from 70 percent in March to 52 percent in April.
“Concerns about commodity prices appeared to have some spillover impact on producers’ views of farmland prices, as the percentage of producers expecting farmland values to increase over the next 5 years declined from 53 percent in February to 46 percent in April,” the report stated.
“Despite the shift toward a less optimistic outlook, however, producers’ perspectives on used farm machinery values and on whether now is a good time to make large farm investments changed very little from a month earlier.”
Survey results can be viewed at www.ag.purdue.edu/commercialag/ageconomybarometer.