The Purdue University/CME Group Ag Economy Barometer weakened in February as producers became less optimistic about current economic conditions and the commodity price outlook. The barometer, which is based on a survey of 400 U.S. agricultural producers, declined 7 points to a reading of 136, down from 143 in January. Weaker expectations for the future and, especially, a decline producers’ perception of current conditions combined to drive the barometer lower. The Index of Current Conditions saw the biggest drop, down from 132 to 119, whereas the Index of Future Expectations weakened slightly, down from 148 to 145.
Last month the survey reflected a significant boost in optimism among agricultural producers after the announcement of the second round of MFP payments; however, it appears that their positive impact eroded quickly. Compared to responses from a year ago, fewer farms said they expect their operation to grow in the future, which could be a sign of increasing financial stress. The survey showed more farms are concerned about marketing risk, ranking it as the biggest risk facing their farming operations.
Last summer, the tariff battle disrupted commodity markets and, as a result, producers’ perspective on whether now is a “good” time or a “bad” time to make large farm investments has been quite volatile. From January 2018 through June 2018, before the trade disruptions emerged as a major market factor, the Large Farm Investment index averaged a reading of 65. However, since that time, the index has had an average reading of 53 points and in February 2019 the index fell to a reading of 50, down 12 points from January, as uncertainty about commodity prices continues to make farmers wary of making large investments in their operations.
