Ag Economy Barometer June 2019

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

The Ag Economy Barometer rebounded in June to a reading of 126, 25 points higher than a month earlier.

The barometer is based upon a nationwide monthly survey of 400 U.S. agricultural producers.

Both of the barometer’s sub-indices, the Index of Current Conditions and the Index of Future Expectations, improved compared to a month earlier. The largest increase was in the Future Expectations Index, which rose 33 points compared to a 13-point improvement in the Current Conditions Index.

The rise in the Index of Future Expectations effectively wiped out the two-month decline in future expectations that took place during April and May, pushing the index back up to the level observed in March. This was in contrast to agricultural producers’ sentiment regarding current economic conditions which, although improved from a month earlier, remained well below that of earlier this spring.

The improvement in farmers’ sentiment occurred in the midst of this spring’s corn and soybean planting delays in the nation’s mid-section, which is expected to lead to unprecedented levels of prevented planting claims for both corn and soybeans. The prospect of large prevented plantings, combined with expectations for yield reductions attributable to delayed planting, pushed both corn and soybean prices up sharply since the May survey was completed, which contributed to the sentiment improvement.

From mid-May to mid-June nearby CBOT corn futures prices increased by about $1 per bushel (+28%) and nearby CBOT soybean futures prices also increased by nearly $1 per bushel (+12%).

This month’s Ag Economy Barometer survey was also conducted after USDA announced on May 23 that a new round of Market Facilitation Payments (MFP) would take place in 2019 and after President Donald Trump signed the Disaster Aid Bill in early June.

USDA’s announcement of a 2019 MFP program indicated that payments would be based on planted acres of a large number of covered crops, including corn and soybeans. In particular, USDA indicated that prevented planting acres would not qualify for MFP payments.

Ten percent of corn and soybean producers said it did impact their prevented planting decision making, and one out of five farmers within that group said they intended to plant more corn, while one out of 10 farmers within that group said they intended to plant more soybeans because of the MFP program announcement.

Nearly one-third (32%) of farmers in our survey said they intended to take prevented planting payments on some of their corn acres.

Although the broad measure of farmer sentiment improved substantially in June, farmers’ perspective on making large investments in their farming operations remained very cautious. The percentage of farmers who said now was a good time to make large investments rose slightly from 18% in May to 20% in June, and the percentage who said it was a bad time to make large investments declined slightly to 78% in June from 81% in May.