Ag Economy Barometer numbers decreased in March to a reading of 133, compared to 136 a month earlier. Increasing concerns about future economic conditions drove the barometer less as the Index of Future Expectations declined to 139 in March compared to an index value of 145 in February.
That contrasted with the producer Index of Current Conditions, which at a reading of 120 was virtually unchanged from February. Although the Future Expectations Index declined in March, it’s still 15 points stronger than a year prior. In contrast the Current Conditions Index is 14 points less than its March 2018 value.
The Large Farm Investment Index rebounded during March to a reading of 57 compared to a value of just 50 one month earlier. This month’s value was the second-best reading for the Investment Index since this past summer when it was in the low 60s. Although the Investment Index improved, the more-optimistic attitude didn’t carry over into producer perspective on farmland values. The percentage of producers expecting farmland values to decline during the next year increased from 20 percent in February to 25 percent in March. Similarly the percentage of producers expecting lesser farmland values five years into the future increased to 15 percent, an increase of 11 percent from one month earlier.
The level of financial stress in the production-agriculture sector continues to be of concern, prompting us to pose several questions to producers on the topic. In March about six out of 10 or 59 percent of producers said they expect their farm’s 2019 financial performance to be about the same as in 2018. The remainder of respondents split evenly between “better than” at 21 percent and “worse than” at 20 percent. Second we asked producers whether they are more or less optimistic about their farm’s financial outlook today compared to a year earlier. About half at 52 percent of respondents indicated they are less optimistic about their farm’s financial future now than a year earlier.
For the second time this year, we asked producers about their farm operating debt. Specifically we asked producers whether or not they expect their operating debt to increase, decrease or remain about the same in 2019 as in 2018. Respondents who indicated they expect their farm’s operating debt to increase received a followup question, asking why they expected their operating debt to increase.
In March 22 percent of farms in our survey said they expect to have a larger operating loan in 2019 than in 2018. When we followed up and asked why, 21 percent said it was because they were carrying over unpaid operating debt from a prior year. Those results were similar to what we observed when we posed the same questions in January 2019. In January 25 percent of the farms in our sample indicated they were going to have a larger operating loan in 2019 than in 2018. When we followed up and asked why their operating loan would be larger, 27 percent responded it was because they needed to carry over unpaid operating debt from prior years. Combined those survey results suggest that 5 percent to about 7 percent of U.S. farms are under some degree of financial stress, using the need to carry over unpaid operating debt as an indicator of financial stress.
What’s going to take place with respect to agricultural exports during the next several years continues to provide uncertainty about the agricultural commodity-price outlook. In March we again asked producers if they expect agricultural exports to increase, decrease or remain the same during the next five years. Just 8 percent of producers expect ag exports to decrease whereas 68 percent said they expect ag exports to increase. That was the most optimistic perspective on ag exports since we first posed that question in May 2017.
To gain more clarity regarding what producers think will happen with respect to the trade dispute with China, we posed two questions.
- First we asked producers whether they think the trade dispute with China will ultimately be resolved in a way that benefits U.S. agriculture. Producers were confident the dispute will be resolved satisfactorily; 77 percent responded yes to that question.
- Then to learn more about the speed with which producers expect the trade dispute with China to be resolved, we asked survey respondents in March if they think it’s likely or unlikely that the soybean trade dispute with China will be settled by July 1. Responses were mixed with more than half at 55 percent of producers indicating they think it’s unlikely the dispute will be settled by July 1.
So producers are cautiously optimistic about future growth in ag exports. More than three-fourths of producers ultimately expect the U.S. trade dispute with China to be resolved in a way that benefits U.S. agriculture. But less than half of producers expect the trade dispute to be resolved before July 1.
Ag-producer sentiment weakened slightly in March as agricultural producers expressed less confidence in future economic conditions. Ag producers also expressed more concern about farmland values; one out of four producers in the March survey said they expect farmland values to decrease during the next 12 months. Despite concerns about future economic conditions, producers in March were more inclined to think this is a good time to make large investments in their farming operations than they were in February. The Large Investment Index increased 7 points compared to a month earlier.
Financial stress is evident among some producers. Survey results from January and March 2019 suggest that 5 percent to as much as 7 percent of U.S. farms are suffering from some financial stress, using the need to carry over unpaid operating debt as an indicator of financial stress. Correspondingly about half of farms surveyed said they are less optimistic about their farm financial future now than they were a year ago.
Finally producers expressed more confidence in the future growth of U.S. ag exports than they have since we first began posing export-focused questions in spring 2017. Although the trade dispute with China is still ongoing, 77 percent of producers expressed confidence that the dispute will ultimately be resolved in a way that favors the United States. But less than half of producers at 45 percent think it’s likely the trade dispute will be resolved prior to July 1, 2019.
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