By James Mintert and Michael Langemeier
The Ag Economy Barometer fell 29 points to 124 in August, after rising sharply two months before.
The barometer’s decline was attributable to declines in both the Index of Future Expectations, which fell 34 points below its July reading, and the Index of Current Conditions, which dropped 19 points below the previous month. Weaker sentiment was fueled in part by both crop and livestock price declines that took place during late July and early August. In particular, prices for corn and soybeans fell sharply as crop conditions improved and USDA released larger than expected crop production estimates on the August Crop Production report. Virtually all of this month’s survey responses were collected following USDA’s release of the Aug. 12 Crop Production report. This month’s nationwide survey of 400 U.S. agricultural producers for the Ag Economy Barometer was conducted from Aug. 12 through Aug. 20, 2019.
Producers’ concerns about the future of the farm economy led to a more negative outlook on both the advisability of making capital investments in their farming operation and on their short-run farmland value outlook. The Farm Capital Investment Index (formerly known as the Large Farm Investment Index) fell to a reading of 56 in August, 21 points lower than a month earlier, but still well above readings from June (42) and May (37) of this year, as farmers’ weaker expectations for future economic conditions on their farms made them less inclined to believe now is a good time to make large investments in buildings and farm machinery.
Producers’ short-run expectations for farmland values also weakened from mid-July to mid-August.
- The percentage of respondents expecting farmland values to rise over the next 12 months declined from 21% in July to 12% in August.
- The percentage expecting lower farmland values in the upcoming year increased from 18% to 21%.
- The percentage of producers expecting higher farmland values 5-years ahead declined to 50% in August, compared to 53% in July.
- The percentage of respondents expecting lower farmland values over the same period declined to 8% from 11% in July.
Since March 2019, farmers’ perspectives regarding the trade war have been monitored. In March, farmers were almost evenly split on this issue with 55% indicating they felt it was unlikely, and 45% saying it was likely, that the trade dispute would be resolved soon. In subsequent months, the percentage of farmers saying they think it is unlikely that the trade dispute will be resolved soon increased, ranging from a high of 80% in May to a low of 68% in June. In August, there was a modest sentiment shift as the percentage of producers expecting resolution soon rose to 29% from 22% a month earlier and the percentage of producers who felt resolution soon was unlikely declined to 71% from 78% in July.
In March, over three-fourths (77%) of farmers expected a beneficial outcome to the trade dispute with that percentage subsequently declining to 65% in May before rebounding in July to 78%. There was a modest sentiment shift in August as the percentage of farmers expecting a positive outcome for agriculture slipped to 72% while the percentage who said they did not expect a favorable outcome for U.S. agriculture rose from 19% in July to 25%.
Market Facilitation Program payments
USDA announced the per planted acre payment rates by county for the 2019 Market Facilitation Program in late July. Payments are to be made in three tranches with the first payment to be made this summer and subsequent payments to be made in late fall 2019 and early 2020, if deemed necessary by the USDA.
Farmers were asked to what degree does $16 billion in MFP payments relieve their concerns about the impact of tariffs on their 2019 farm income and whether or not respondents expect USDA to provide payments to U.S. farmers for the 2020 crop year.
Responses indicated that over two-thirds (71%) of farmers feel that the 2019 MFP program will either completely or somewhat relieve their concerns about the impact of tariffs on 2019 farm income. However, nearly three out of ten respondents said “not at all” in response to this question, indicating that they felt the MFP payments fell short of making up for income losses attributable to the ongoing tariff battles. Looking ahead to 2020, 58% of farmers in the August survey said they expect another MFP payment to be made to U.S. farmers for the 2020 crop year.