The Ag Economy Barometer improved to a reading of 136 in October, an increase of 15 points compared to September. That pushed the barometer back to the same level observed in October 2018.

This month’s increase in the ag-economy-sentiment index was driven by an improvement in ag-producer assessments of both current and future economic conditions in agriculture. The Index of Current Conditions increased from 100 in September to 115 in October. The Index of Futures Expectations also increased 15 points to a reading of 146.

The Ag Economy Barometer and related indices are based upon results from a nationwide telephone survey of 400 U.S. crop and livestock producers. This month’s survey was conducted Oct. 14-22.

Producers had a more-favorable view regarding making large investments in their farming operations when surveyed in October compared to September. The Farm Capital Investment Index increased to a reading of 59, 12 points better than a month earlier. The investment index has been relatively volatile in recent months, dipping to 37 in May before rebounding sharply in early summer. The October reading takes the investment index back to within 8 points of its July 2019 peak of 67.

Producer expectations for farmland values, both in the coming 12 months and during the next five years, improved in October from September. For both forecast timeframes the percentage of producers expecting lesser farmland values was unchanged in October from September. But the percentage of producers expecting better values increased. Looking ahead one year, 16 percent of producers said they expect farmland values to increase compared to 11 percent who felt that way in September. When asked about their outlook for the next five years, 53 percent of producers indicated they expect farmland values to increase compared to 49 percent in the September survey. So in both cases the increase in producers expecting better values occurred because of a shift away from expecting no change to occur, to becoming more optimistic about farmland values.

Producer perspective regarding farmland values appeared to be consistent with expectations for cash rental rates in the coming year. In particular there was a sizable increase in the percentage of producers who said they expect no change in rental rates during the next year. In October 79 percent of respondents said they expected no change in rental rates, compared to 67 percent who reported that in September. But compared to the previous month, fewer producers said they expect rental rates in the coming year to decline – 14 percent in October vs. 22 percent in September. At the same time there was a small decline in the percentage of producers in the October survey who said they expect cash rental rates to increase, compared to responses received in September.

When queried about the likelihood that the soybean-trade dispute with China will be resolved soon, farmers were less pessimistic in October than they were in September. In October 51 percent of respondents said that resolution soon was unlikely, which was a decrease from a reading of 59 percent in September and 71 percent in August. The percentage of respondents who expect the trade dispute to be resolved quickly was virtually unchanged in October at 42 percent compared to September, although it remained much better than in August at 29 percent. Comparing October’s results to September’s, the primary shift in opinion was attributable to fewer respondents who said they felt quick resolution was unlikely shifting to saying they were uncertain as to whether or not the dispute would be resolved soon.

Beginning this past spring we’ve been posing a question regarding the trade dispute, by asking farmers if they think the dispute will ultimately be resolved in a way that’s beneficial to U.S. agriculture. In October 75 percent of farmers in our survey said yes to that question while just 20 percent said no. That compares to 72 percent of respondents saying yes to this question in both August and September. We’ve asked this question every month since March 2019. In six of the eight months more than 70 percent of respondents said yes, they expect the dispute to ultimately be resolved in a way that benefits U.S. agriculture.

Although the U.S.-Mexico-Canada Trade Agreement has been agreed upon by trade negotiators for all three countries, it has yet to be approved by the U.S. Congress. Of respondents on our October survey, 96 percent told us that the three-country trade agreement was either important or very important to the U.S. ag economy. But only a slim majority at 55 percent of respondents said they expect the agreement to be approved soon. Similarly 97 percent of the respondents in October indicated the recently announced trade agreement with Japan is important to the U.S. ag economy. Unlike the U.S.-Mexico-Canada agreement, the pact with Japan does not need to be approved by the U.S. Congress.

Given the large prevented-plantings of both corn and soybeans in 2019, there could be a large increase in U.S. planted acreage in 2020. To learn more about farmer spring-planting plans we asked farmers who grew corn or soybeans this year if they intended to increase, decrease or keep their acreage of those two crops the same in 2020. About three-fourths of both corn and soybean producers said they did not plan to increase or decrease their acreage of those two crops in 2020.

But 14 percent of corn growers and 12 percent of soybean growers in our survey said they intended to increase their acreage of those two crops. We returned to farmers who plan to increase their crop acreage to ask them by how much they expect to increase their acreage in 2020 compared to 2019. Two-thirds of corn growers who told us they will increase corn acreage in 2020 said they intend to increase their corn acreage by 10 percent or more. One-third of them said they planned to increase corn acreage by more than 20 percent. Eighty percent of soybean growers who told us they will increase their soybean acreage in 2020 told us they expect to increase their soybean acreage by 10 percent or more, and 40 percent of them said they actually intended to increase their acreage by more than 20 percent.

Registration for the 2019 Market Facilitation Program is still underway; many producers have already received the first of three possible payments. Because 2019 is the second year in a row that the U.S. Department of Agriculture has provided Market Facilitation Program payments, we asked producers whether or not they anticipate the USDA providing Market Facilitation Program payments to U.S. farmers for the 2020 crop year. Sixty-two percent of producers in the October survey said they do expect another round of payments for the 2020 crop, an increase slightly compared to the 58 percent of farmers who told us in August they expect another round of payments for the 2020 crop.

Wrapping Up

The Ag Economy Barometer increased 15 points in October as producers became more optimistic about both current and future economic conditions on their farms. Farmers in October were more inclined to think now is a good time to make large investments in their farming operations. More farmers said they expect farmland values to increased, than in September. Although three-fourths of farmers in this month’s survey said they expect the soybean-trade dispute with China to be resolved in a way that’s favorable to U.S agriculture, 62 percent of producers said they expect to receive another round of Market Facilitation Program payments for the 2020 crop year. Finally in an early look at planting intentions for spring 2020, 14 percent of corn growers and 12 percent of soybean growers said they plan to increase their acreage of those two crops compared to 2019. Most growers who plan to increase their acreage of corn or soybeans are planning substantial acreage increases.

Visit ag.purdue.edu/commercialag/ageconomybarometer for more information.

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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. Visit ag.purdue.edu for more information.