By James Mintert and Michael Langemeier

The December 2018 Purdue University/CME Group Ag Economy Barometer came in at 127, which was virtually unchanged from December 2017 when the barometer stood at 126.

It came in 7 points below the November 2018 reading and 9 points below the October reading. This month’s decline in the Ag Economy Barometer occurred because producers’ perceptions of current conditions and their expectations for the future both drifted lower this month compared to November.

The Index of Current Conditions declined six points this month to 109 and the Index of Future Expectations fell to 135 compared to 143 in November. This month’s survey was completed before President Trump signed the Agricultural Improvement Act of 2018, known as the Farm Bill, into law so it remains to be seen what impact, if any, passage of that legislation has on U.S. farmer sentiment.

Compared to a year earlier, an interesting shift in producer perceptions has taken place regarding both current conditions and future expectations. The December 2018 Index of Current Conditions was substantially below a year earlier, registering a year-to-year decline of 30 points. In contrast, the Index of Future Expectations was actually 15 points higher in December 2018 than in December 2017. This divergence in perceptions has been especially notable since last spring as producers continue to exhibit more confidence in future conditions for their farms in the face of weakening perceptions regarding current economic conditions.

Wary of large investments

Producers interest in making large investments in their farm operations waned somewhat in December as the Large Farm Investment Index fell to a reading of 51, five points below a month earlier but still 9 points higher than in September, when it reached its lowest reading of the last three years. The investment index remains well below a year ago, when it reached a reading of 70, suggesting farmers are wary of making substantial farm investments given current financial conditions on their farms.

Ag trade concerns

Concerns about agricultural trade continue to dominate headlines. To track farmers perceptions about future exports we have repeatedly asked farmers whether they expect U.S. agricultural exports to increase or decrease in the upcoming five years. Responses to this question became more positive from April through November 2018, but that changed on the December survey as the percentage of producers expecting exports to increase declined from 66% in November to 59% in December and the percentage expecting exports to decrease increased from 10% in November to 26% in December.

Time to add a generation?

Each December we ask producers whether now is a good time to bring a new generation into their family’s farming operation. In both 2016 and 2017 responses were split down the middle with approximately 50% of respondents saying yes, it is a good time and 50% saying no, it is not a good time. Responses on the December 2018 survey differed from the two previous years as just 42% of respondents indicated now is a good time to bring a new generation onboard and 58% saying now is not a good time. When a follow-up question was posed asking whether they expected 5 years from now to be a more favorable time to bring a new generation onboard, responses were much more positive with 65% of respondents expecting conditions 5 years from now to be more favorable to onboarding a new generation.

Livestock outlook

Producers indicated in December that contraction of both the beef and dairy herds is more likely in 2019 than expansion. In contrast, producers expect hog herd expansion to continue during 2019. Here's what respondents said:

On-farm tech

Farmers were queried regarding their usage of drones on their farms.

Thirty-four percent of survey respondents said a drone was used on their farm in the last year. On farms where a drone was used, nearly two-thirds (64%) of respondents said the drone was used by one of their farm’s service providers with just 36% of farms indicating a member of their own staff used the drone.

How were the drones used?

Just over half (56%) of farms that used a drone in 2018 said that drone usage provided added value to their farm operation, whereas 44% indicated that it did not add value. Looking ahead to 2019, just 6% of farms surveyed said they plan to purchase a drone in 2019.

Read more here: https://ag.purdue.edu/commercialag/ageconomybarometer/ag-barometer-weakened-in-december/

Source: Purdue University/CME Group, which is solely responsible for the information provided and is wholly owned by the source. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset.