Agricultural producers were more optimistic about the agricultural economy in January, but they remain concerned about farmland values, according to results from the January Purdue University/CME Group Ag Economy Barometer. The barometer, which is based on 400 survey responses from agricultural producers across the country, rebounded to a reading of 143 in January, a 16-point improvement from December.
This survey provided the first opportunity to measure farmers’ sentiment following the announcement of USDA’s second round of Market Facilitation Program (MFP) payments and the passage of the 2018 Farm Bill and it appears that these two announcements provided a significant boost to producer sentiment regarding both current and future economic conditions.
In January, both of the barometer’s two sub-indices saw an uptick since December, with the Index of Current Conditions rising to 132 from 109 and the Index of Future Expectations rising to 148 from 135.
Increases were also seen in the Large Farm Investment Index, which measures whether producers feel this is a “good time” or a “bad time” to make large farm investments like machinery or buildings. Over the past few months, producers have been slowly expressing a more favorable view towards making large investments in their farming operations, with the index climbing 11 points from December and up 20 points from September, when the investment index bottomed out.
However, the same cannot be said for farmland values. According to the January survey, the percentage expecting higher farmland values over the next 12 months declined from 17 to 13 percent in December and, when asked to look ahead 5 years, producers expecting higher farmland values declined 2 points to 48 percent.
To better understand farmers’ planting intentions in 2019, the survey asked farmers who planted soybeans in 2018 what their plans are for 2019. Two-thirds of respondents said their soybean acreage will be the same as in 2018, but 25 percent of soybean producers said they intend to reduce their soybean acreage in 2019 compared to last year. Looking specifically at farmers who plan to reduce their soybean acreage in 2019, 58 percent of them said they will reduce acreage by more than 10 percent, while 42 percent said they would reduce acreage by 10 percent or less.
This represented a shift in attitudes among soybean farmers from last fall. Back in November, among farmers that plan to reduce their soybean acreage, 69 percent of them said they planned to reduce their 2019 soybean acreage by more than 10 percent. When producers were asked about soybean futures, four out of ten respondents (43 percent) said they expect November 2019 soybean futures to fall below $8.50 sometime between mid-January and summer 2019. The negative perspective on soybean prices helps explain producer’s plans to reduce their 2019 soybean acreage.