Editor’s note: The following was written by James Mintert and Michael Langemeier for the Purdue University/CME Group Ag Economy Barometer report released Feb. 4.

The Ag Economy Barometer rose to a reading of 167 in January, a 17-point jump from December when the index stood at 150.

Virtually all of the rise in this month’s barometer was attributable to a sharp rise in optimism about future conditions in agriculture. The Index of Future Expectations climbed 24 points to 179, while the Index of Current Conditions at 142 was essentially unchanged from the December reading of 141.

This month’s Ag Economy Barometer survey, which is based on responses from a nationwide survey of 400 agricultural producers, was conducted from Jan. 13-17. The sharp improvement in future expectations coincided with President Donald Trump’s signing of the phase one trade agreement between the U.S. and China on Jan. 15.

In the agreement, China agreed to increase purchases of U.S. manufacturing, energy and agricultural goods and services by at least $200 billion over two years, but it did not include specific information regarding which U.S. goods and services would benefit from the purchases.

Trade outlook

Agricultural producers have become noticeably more optimistic about the future of agricultural trade over the last several months. As recently as October, just 55% of the farmers in our survey said they expect to see U.S. ag exports increase over the next five years. That changed in November and continued through the January survey as 70-71% of survey respondents said they expect to see ag exports rise in the upcoming years.

Part of the improvement in farmers’ trade outlook can be traced to a shift in their expectations regarding the trade dispute with China. Although the phase one trade agreement with China did not explicitly address the soybean trade dispute, the percentage of farmers who expect the soybean trade dispute to be settled soon rose to 69% in January from 54% in December.

That percentage has been rising steadily since July when just 22% of producers said they expected a quick resolution to the soybean trade dispute.

At the same time, 80% of farmers in January said they expect a favorable outcome to the trade dispute with China compared to 72% who felt that way in December.

Growth plans

Each winter, we ask producers about future plans for their farming operation. Specifically, we ask what is a reasonable growth rate for their farming operation over the upcoming five years?

Over the five years that we’ve included this question on the barometer survey, there has consistently been a small percentage of farms that plan to grow rapidly and a relatively large group that either has no plans to grow or actually plans to exit or retire from farming. That was true again this year.

But what was noticeable this year was a trend in the responses, with the percentage of farms that either have no plans to grow or actually plan to exit/retire from farming rising over time.

For example, two years ago, 28% of respondents said they had no plans to grow, while a year ago 38% of respondents said they had no plans to grow their operation.

In January 2020, that percentage rose again to 44% of respondents. Combined, farms that either have no plans to grow or plan to exit/retire totaled 56% of the farms in the January 2020 survey, compared to 50% last year, and just 39% two years ago.

Correspondingly, fewer farms in this year’s survey indicated they expect to grow rapidly compared to prior years. The rise in the number of farms that don’t plan to grow could be a response to a perceived rise in risk on the part of farm operators.

Farm programs

Farmers are faced with a March 15 deadline to sign-up for the USDA’s Agriculture Risk Coverage (ARC) or Price Loss Coverage (PLC) program under the 2018 Farm Bill. This year’s sign-up is for the 2019 and 2020 crop years, and farmers can choose different programs for corn or soybeans.

USDA’s Farm Service Agency indicates the vast majority of farmers have not enrolled their farms yet. To learn more about farmers’ perspective on which program might be more attractive, we asked farmers which program they planned to enroll in for corn for the 2019 and 2020 crop years.

The majority (57%) of farmers in our survey are still uncertain about which program they will choose. However, among the farmers who have decided, there appeared to be a shift away from the program choice made by many farmers for the 2014 Farm Bill. Under the 2014 Farm Bill, the most popular program choice among corn farmers was the ARC-County program. This month’s survey responses indicate that might not be the case for the 2018 Farm Bill sign-up.

In our January survey, the PLC program was chosen by 23% of respondents, while 14% of respondents chose the ACR-County program.

However, unlike in the 2014 bill sign-up period, the ARC-Individual Coverage program appears to be a viable option for a significant number of producers as 6% of respondents indicated that was their preferred program choice.