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See the big picture through the Ag Economy Barometer

See the big picture through the Ag Economy Barometer
Here is how to gauge producer sentiment and understand why producer sentiment matters.

Sometimes perception is indeed reality. Ag economists believe that knowing what farmers are thinking about their business in the short term and long term is important.

Purdue University’s Center for Commercial Agriculture and the CME Group, a futures company, release the monthly results of the Ag Economy Barometer. It is a tool recently developed to help get a better picture of what farmers are thinking. It’s also an attempt to quantify farmer thoughts and feelings with numbers so ag economists can compare how those thoughts and sentiments change over time.

SENTIMENT SWINGS: What kind of business climate farmers expect in the next five years can change from month to month. This fall, expectations tended to improve as harvest began and farmers found good crops.

It is important to understand what these results and reports say in order to use the information for decision-making. The time of year, national and local markets, along with previous responses are all important factors when analyzing a month’s results.

Why results matter

This information and these numbers may appear to be quite general and irrelevant to an operation, but they have implications that are important to anyone in agriculture. This data reflects a balance in the relationship between the crops and livestock industries — giving a broad view of the ag economy as a whole, while also giving a specific view into the main contributing sectors of the ag economy.

As an example, look at the September 2016 Ag Economy Barometer. September data gives a rare glance into the thoughts and expectations of producers across the nation as they headed into harvest. According to Michael Langemeier, assistant director at the Center for Commercial Agriculture and an Extension ag economist, as producers saw larger yields with the beginning of harvest, they appeared to have a more optimistic outlook.

See the big picture through the Ag Economy Barometer
The September monthly survey of 400 U.S. agricultural producers showed an overall index value of 101. That was up from 95 in the August survey. Note that it rose even more in the October survey as the optimism from higher yields filtered in. The overall barometer index is a reliable tool to compare sentiment for the entire agriculture economy to previous months.

Livestock and crops

Both livestock and crops indexes of current conditions and future expectations also saw moderate increases in September (see below). Although producers reported sentiment increases for future expectations, fewer producers reported that they expect widespread good times in the next five years.

The September barometer showed that expectations of widespread good or bad times in the next five years for livestock and crops continued to correlate directly. Since April 2016, numbers for both livestock and crops, in regard to widespread good times, have risen and fallen together. This relationship was not seen in the polling data from earlier in 2016, Langemeier notes.

Richardson is a senior in ag communication at Purdue University.

See the big picture through the Ag Economy Barometer

FUTURE BETTER OR WORSE? Crop and livestock farmers sometimes feel different about what the next five years will hold for their businesses, as noted in this barometer snapshot.

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