The latest research from the Purdue Center for Commercial Agriculture suggests that, despite recent price increases, farmers are still pessimistic about the farm economy. After a surge in economic sentiment in April, agricultural producers said they were slightly less optimistic in May, according to the latest survey results from the Purdue/CME Group Ag Economy Barometer. At a value of 97, the May Producer Sentiment Index was nine points lower than in April, bringing it back in line with January (98) and February (96). The index is based on a monthly survey of 400 agricultural producers. Survey responses showed that the shift came from producer feelings about current conditions rather than future expectations. The Index of Current Conditions fell from 107 in April to 83 in May, while the Index of Future Expectations fell just one point, from 105 to 104.
Increased pessimism is likely due in part to falling livestock prices, according to Jim Mintert, director of Purdue’s Center for Commercial Agriculture, professor of agricultural economics and principal investigator for the barometer. “Some of the decline in producer sentiment in May can likely be attributed to changing perceptions about the livestock sector,” he said. “In May, just 36 percent of producers surveyed expected widespread good times for livestock producers over the next five years, which is a substantial drop from the 46 percent in April who expected good times for livestock production.”
The survey not only measurers producers current state of mind but their view of the future, which Mintert says is also not good. “There is still a lot of long term concern about the future of the agricultural economy. In short, the sentiment regarding the future for livestock producers, which had been strong, showed signs of eroding relative to expectations about the future for crop producers,” Mintert said.
One key component of farmers’ view of the ag economy is their feeling about land values. The percentage of producers who expect farmland prices to increase in the next year has been small but fairly stable since November, consistently landing in a range from 13 percent to 15 percent. The percentage of producers expecting farmland prices to fall in the next year has fluctuated more. In November and March, 46 percent of producers surveyed expected farmland values to fall. Respondents were less pessimistic in May, when just 33 percent said they expected a decline. Grain prices play a role; and, overall, producers still see farmland as a good investment. Purdue research associate David Widmar stated, “The reduction in pessimism regarding near-term farmland prices is likely driven by the improvement in crop prices the last couple of months. A majority of producers also still see farmland as a favorable long-term investment.” When asked to evaluate farmland as an investment, 52 percent of producers surveyed rated it positively and about 25 percent gave it a neutral rating. Only 23 percent said they thought farmland was a poor investment.
Finally, producers were asked about farmer profitability over the next year. Only 10 percent reported that they expect profitability to improve.
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