The Purdue University-CME Group Ag Economy Barometer rose one point in July 2020 to a reading of 118. The small change in the barometer left it 30% below its February 2020 peak and 23% below its level a year ago.
Although there was little change in the barometer this month, there was a shift in producers’ perspective on current vs. future conditions as the Index of Current Conditions rose 12 points to 111 while the Index of Future Expectations fell to a reading of 121, five points lower than in June.
The Ag Economy Barometer is calculated each month from 400 U.S. agricultural producers’ responses to a telephone survey. This month’s survey was conducted from July 20-24, 2020.
Farm machinery purchases
The percentage of farmers who plan to reduce their farm machinery purchases compared to a year ago came in at 56%, unchanged from a month earlier but nine points lower than back in May. The percentage of farmers who plan to keep machinery purchases about the same as a year earlier came in at 38%, also unchanged from the June reading but seven points higher than in May. Consistent with farmers’ perspective on farm machinery purchases, the Farm Capital Investment Index, with a reading of 60, was unchanged from June. Both the June and July readings for the investment index were stronger than in May, however, when the index stood at a reading of 50.
Producers’ short-run perspective on farmland values improved in July compared to June as 16% of respondents said they expect farmland values to rise over the next 12 months compared to 10% who expected values to rise back in June. Farmers were somewhat less optimistic regarding land values over the longer term, with 48% of farmers saying they expect values to rise over the next five years compared to 55% who felt that way in June.
Although a clear majority of farmers responding to the July survey were still worried about coronavirus impacting their farm’s profitability in 2020, the percentage of farmers who were either “fairly worried” or “very worried” has been declining since March. For example, in March, 74% of respondents expressed concern about the impact of COVID-19 on their farm’s profitability whereas in July, that percentage had fallen to 61%. However, two-thirds of farmers responding to the July survey still said they feel that Congress needs to pass another bill to provide additional economic assistance to farmers, in line with responses received for this question in both May and June.
On both the June and July surveys, four out of 10 respondents said they are conducting more business online as a result of COVID-19. On the same two surveys, over half (53%) of farmers said they were less likely to attend in-person educational programs as a result of COVID-19 concerns.
Instead, farmers are relying upon farm magazines, listening to farm radio broadcasts, reading emails, visiting websites, viewing online webinars and videos and listening to podcasts.
Volatility in the agricultural markets this year has highlighted the importance of risk management. This month’s survey included several risk management related questions. Just two out of 10 farmers (21%) said they have a marketing adviser. Among those farms that do have a marketing adviser, 36% said they chose their adviser based upon a recommendation from another producer, and 16% said it was based upon a recommendation from another agribusiness. Approximately one out of 10 farmers (11%) chose their marketing adviser as a result of an adviser’s direct solicitation to them via U.S. mail, email or phone call while 6% of respondents said they chose their adviser based on an article either written by or quoting the adviser. Farms that work with a marketing adviser said they either “follow somewhat closely” (54%) or “follow very closely” (45%) their marketing adviser’s recommendations.