By James Mintert and Michael Langemeier
The Ag Economy Barometer increased 15 points from September to October 2019, reaching a reading of 136 in October, the same level as a year ago.
This month’s upswing in the ag economy sentiment index was driven by an improvement in ag producers’ assessments of both current and future economic conditions in agriculture. The Index of Current Conditions rose from 100 in September to 115 in October and the Index of Futures Expectations also rose 15 points to a reading of 146.
The Ag Economy Barometer and related indices are based upon results from a nationwide telephone survey of 400 U.S. crop and livestock producers. This month’s survey was conducted from Oct. 14-22, 2019.
Producers had a more favorable view regarding making large investments in their farming operations when surveyed in October compared to September. The Farm Capital Investment Index rose to a reading of 59, 12 points higher than a month earlier. The investment index has been relatively volatile in recent months, dipping to a low of 37 in May before rebounding sharply in early summer. The October reading takes the investment index back to within 8 points of its July 2019 peak of 67.
Producers’ expectations for farmland values, both in the upcoming 12 months and over the next 5 years, improved in October from September. For both forecast timeframes, the percentage of producers expecting lower farmland values was unchanged in October from September, but the percentage of producers expecting higher values rose. Looking ahead one year, 16% of producers said they expect farmland values to rise compared to 11% that felt that way in September.
When asked about their outlook for the next 5 years, 53% of producers indicated they expect farmland values to increase compared to 49% on the September survey. So, in both cases, the increase in producers expecting higher values occurred because of a shift away from expecting no change to occur to becoming more optimistic about farmland values.
Farmland rental rates
There was a sizable increase in the percentage of producers who said they expect no change in rental rates over the next year. In October, 79% of respondents said they expected no change in rental rates compared to 67% in September. However, compared to last month, fewer producers said they expect rental rates in the upcoming year to decline (14% in October vs. 22% in September). At the same time, there was a small decline in the percentage of producers in the October survey that said they expect cash rental rates to increase compared to responses received in September.
Farmers were less pessimistic in October than they were in September about trade war resolution.
- In October, 51% of respondents said resolution soon was unlikely, which was down from a reading of 59% in September and 71% in August.
- The percentage of respondents that expect the trade dispute to be resolved quickly was virtually unchanged in October (42%) compared to September, although it remained much higher than in August (29%).
- Comparing October’s results to September’s, the primary shift in opinion was attributable to fewer respondents saying they felt quick resolution was unlikely to saying that they were uncertain as to whether or not the dispute would be resolved soon.
- In October, 75% of the farmers surveyed said they thought the dispute will be resolved in a way that’s beneficial to U.S. agriculture, while 20% said no.
- In August and September, 72% of respondents said they thought the trade dispute with China would be resolved in a way that’s beneficial to U.S. agriculture.
- In six of the eight months since March 2019, more than 70% of respondents said they expect the dispute to be resolved in a way that benefits U.S. agriculture.
- 96% of respondents on the October survey said the U.S.-Mexico-Canada Trade Agreement was either important or very important to the U.S. ag economy, but only a slim majority (55%) of respondents said they expect the agreement to be approved soon.
- 97% of the respondents in October indicated the recently announced trade agreement with Japan is important to the U.S. ag economy. Unlike the U.S.-Mexico-Canada agreement, the pact with Japan does not need to be approved by the U.S. Congress.
Given the large prevented plantings of both corn and soybeans in 2019, there could be a large increase in U.S. planted acreage in 2020. Farmers were asked if they intended to increase, decrease or keep their acreage of corn and soybeans the same in 2020. Approximately three-fourths of both corn and soybean producers said they did not plan to increase or decrease their acreage of those two crops in 2020.
However, 14% of corn growers and 12% of soybean growers said they intended to increase their acreage of those two crops, respectively. We followed up with farmers that plan to increase their crop acreage and asked them by how much do they expect to increase their acreage in 2020 compared to 2019. Two-thirds of corn growers who told us they will increase corn acreage in 2020 said they intend to increase their corn acreage by 10% or more and one-third of them said they planned to increase corn acreage by more than 20%. Eighty percent of soybean growers who told us they will increase their soybean acreage in 2020 told us they expect to increase their soybean acreage by 10% or more and 40% of them said they actually intended to increase their acreage by more than 20%.
What about farm payments?
Sign-up for the 2019 Market Facilitation Program is underway and many producers have already received the first of three possible 2019 MFP payments. Since 2019 is the second year in a row that USDA has provided MFP payments, producers were asked whether or not they anticipate USDA providing MFP payments to U.S. farmers for the 2020 crop year. Sixty-two percent of producers said they do expect another round of MFP payments for the 2020 crop, up slightly, compared to the 58% of farmers that told us in August they expect another round of MFP payments for the 2020 crop.