Producer sentiment about the agricultural economy soared on the heels of November’s presidential election, according to the December Purdue/CME Group Ag Economy Barometer report released Jan. 10.
The December survey results landed the barometer at an all-time high reading of 132—a 16-point jump from the November survey. The barometer is based on a monthly survey of 400 U.S. agricultural producers.
Producer optimism surrounding both current conditions and, especially, future expectations drove the increase. The Index of Current Conditions rose to 102 from November’s 87, while the Index of Future Expectations increased from 130 in November to 146 in December.
“Looking back at the data from the last several months, it’s apparent that we’ve seen a big swing in producers’ expectations about the future,” says James Mintert, barometer principal investigator and director of Purdue’s Center for Commercial Agriculture. “Although both the Current Conditions and Future Expectations Indices increased the last couple of months, it was the increase in the Index of Future Expectations, which jumped 51 points since October to reach an all-time high in December, that triggered the sharp rise in the barometer.”
Producers’ improving sentiment doesn’t seem to be driven by changes in corn and soybean prices, Mintert said. For example, March 2017 CBOT corn futures were slightly weaker during the November and December survey periods than during the October survey. On the soybean side, January 2017 CBOT futures were unchanged in November and only slightly stronger in December than those during the October survey collection period.
Additionally, improved economic sentiment extends beyond just agriculture, said David Widmar, senior research associate and leader of research activities for the barometer. In October and December, producers were asked about their expectations for the broad U.S. economy and the results were surprising.
“The contrast in sentiment from the October survey—three weeks prior to the U.S. elections—and the December survey—five weeks after the elections—is remarkable,” Widmar said.
When asked in the October survey about their expectations for the U.S. economy over the next 12 months, only 13 percent of respondents said they expected it to expand, while 23 percent said they expected it to contract. In the December survey, half of the respondents expected economic expansion and only 13 percent expected contraction in the year ahead.
“The improvement in optimism regarding the U.S. economy among agricultural producers appears to parallel that of U.S. consumers,” Widmar said.
The University of Michigan’s Index of Consumer Sentiment confirmed that observation with a rise from 87 in October to a 12-year high of 98 in December.
Read the full December Ag Economy Barometer report, including producer sentiment about the next five years and the health of their own operations, at http://purdue.edu/agbarometer. The site offers additional resources, such as past reports, charts and survey methodology, and a form to sign up for monthly barometer email updates and quarterly webinars.
The Ag Economy Barometer, Index of Current Conditions and Index of Future Expectations also are available on the Bloomberg Terminal under the following ticker symbols: AGECBARO, AGECCURC and AGECFTEX.