WEST LAFAYETTE, Ind. and CHICAGO, Nov. 3, 2020 /PRNewswire/ -- The Purdue University/CME Group Ag Economy Barometer rose 27 points to a reading of 183 in October and set an all-time high for the index. Farmers were more optimistic about both the future and current financial situation on their farms, the Current Conditions Index rose 36 points to a reading of 178 and the Future Expectations Index rose 23 points to a reading of 186. The Ag Economy Barometer is based on survey responses from 400 U.S. agricultural producers and was conducted between October 19-23, 2020.
"Since bottoming out this summer, the ag economy has rebounded sharply and the dramatic improvement in sentiment reflects the turnaround in the farm income picture," said James Mintert, the barometer's principal investigator and director of Purdue University's Center for Commercial Agriculture.
Mintert was referring to a late summer/early fall rally in commodity prices combined with government program payments arising from the second round of the Coronavirus Food Assistance Program (CFAP 2), which provided a boost to many producers' farm income. Corn and soybean prices continued to rally even though U.S. corn yields are expected to set a record high and USDA projects soybean yields to be the fourth highest on record.
"Together the combination of good yields, a rally in crop prices and CFAP 2 payments set the stage for an all-time-high in the barometer and farmer sentiment," said Mintert.
That optimism was reflected in many ways. Comparing their farm's financial condition today to one-year ago, 25% of survey respondents said their farm was better off financially now than at the same time last year. This was the most positive response from producers to this question in the history of the barometer survey.
The Farm Capital Investment Index also hit an all-time high in October, up 9 points from September to a reading 82. The percentage of producers expecting to increase their purchases of machinery in the upcoming year rose to 14 percent from 11 percent a month earlier, and up from just 4 percent back in May. Even more importantly, the percentage of respondents who plan to reduce their purchases in the next year was 33 percent, down from 40 percent in September.
The short-run outlook toward farmland values also improved. Respondents expecting land values to rise over the next 12 months rose to 27 percent, up from 23 percent in September. The percentage expecting lower farmland values declined to nine from 12 percent. There was also a big shift in sentiment in the October survey regarding 2021 cash rental rates for farmland. Nearly four out of ten (38%) respondents said they expect cash rental rates to increase in 2021. In September, just 8 percent of producers said they expected to see higher cash rental rates for farmland in 2021.
Producers also became more optimistic about trade with China this month. Nearly six out of 10 respondents (59%), said they expect to see China fulfill the food and agricultural import requirements outlined in the Phase One trade agreement with the U.S., compared with just 47 percent in September. When asked for their overall perspective on U.S. ag exports, the percentage of producers expecting exports to rise over the next five years increased to 65 percent in October, up from 58 percent in September.
Read the full Ag Economy Barometer report at https://purdue.ag/agbarometer. The site also offers additional resources - such as past reports, charts and survey methodology - and a form to sign up for monthly barometer email updates and webinars.
Each month, the Purdue Center for Commercial Agriculture provides a short video analysis of the barometer results, available at https://purdue.ag/barometervideo, and for even more information, check out the Purdue Commercial AgCast podcast. It includes a detailed breakdown of each month's barometer, in addition to a discussion of recent agricultural news that impacts farmers. Available now at https://purdue.ag/agcast.
The Ag Economy Barometer, Index of Current Conditions and Index of Future Expectations are available on the Bloomberg Terminal under the following ticker symbols: AGECBARO, AGECCURC and AGECFTEX.
About the Purdue University Center for Commercial Agriculture
The Center for Commercial Agriculture was founded in 2011 to provide professional development and educational programs for farmers. Housed within Purdue University's Department of Agricultural Economics, the center's faculty and staff develop and execute research and educational programs that address the different needs of managing in today's business environment.
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Photo Caption: Ag Economy Barometer rises to record high on improving financial conditions. ( Purdue/CME Group Ag Economy Barometer/ James Mintert)
A publication-quality photo is available at https://www.purdue.edu/uns/images/2020/AgEconomyBarometer_Oct2020LO.jpg.
SOURCE CME Group