The new September Ag Economy Barometer shows a slight uptick over the August value, going from 95 up to 101 and still short of the peak reading of 112 in July after a late spring and early summer rally in corn and soybean prices. Jim Mintert, the director of Purdue’s Center for Commercial Agriculture, talked about the rebound.
“Part of that was tied back to a little bit of an improvement with respect to some optimism about the future in agriculture,” he said. “When we look at the index of future expectations, which is based on several of the questions in the barometer survey, that improved from a reading of 102 back in August to 109. And that was one of the big drivers of the improvement. The index of current conditions really didn’t change very much, moving from 80 to 83, so the driver is this kind of retention of some optimism about the future.”
But most say they don’t expect widespread good times in either livestock or crop farming. All year long those surveyed have said they have priced or sold less of the 2016 crop than typical. In September an even larger percent said they had priced or sold less than typical.
“It probably reflects to some extent the improvement in yield prospects from July to September, with a recognition now that in some locations we’re looking at a record crop and on a nationwide basis looking at a record crop. So I think the larger increase in production is being illustrated there. The other thing that it probably shows though is that people are reluctant to sell at these recent price levels, so there is some optimism over where prices are going over the course of the winter and perhaps into the spring, an expectation that we will see some stronger prices and some positive storage returns. So that suggests maybe there’s some risk out there with respect to carrying that large of an inventory, a larger than normal inventory over the course of the storage season.”
Mintert said current conditions continue to challenge everyone in agriculture, especially crop farmers, where optimism lags behind the livestock sector.
“Some of the optimism that was present in the livestock sector has eroded over time. Still a little more optimism than the crop sector but not as much as people were expecting. If you think about what’s been taking place in the livestock markets over the course of 2016, I think profitability has not panned out the way most people in the industry were expecting. I think most people were expecting a more positive 2016 than what we’ve seen so far. Supplies have increased more rapidly and we’ve seen more erosion of prices.”
Purdue and CME Group partner to produce the barometer each month, based on monthly surveys of 400 U.S. agricultural producers. Read the full September report, find additional resources and sign up to receive monthly barometer email updates at https://purdue.edu/agbarometer.