Ag Barometer rises as crop prices rally and USDA announces CFAP 2

Rhea-AI Summary

Farmer sentiment reached a post-pandemic high in September 2020, with the Ag Economy Barometer increasing to 156, up 12 points from August. The Current Conditions Index rose to 142 (+18 points), while the Future Expectations Index increased to 163 (+9 points). Optimism stems from rising crop prices and the USDA's CFAP 2 payments. However, expectations for agricultural exports dropped from 67% in August to 58%. Only 47% believe China will fulfill import commitments. Additionally, 40% of corn/soybean producers plan to use cover crops, primarily for soil health.

Positive

• Farmer sentiment index rose to 156, the highest since the pandemic began.
• Current Conditions Index increased by 18 points, indicating improved immediate conditions.
• Future Expectations Index increased by 9 points, showcasing better long-term outlook.
• Strengthening crop prices and USDA CFAP 2 payments are boosting farmer optimism.
• 40% of corn/soybean producers intend to plant cover crops for improved soil health.

Negative

• Expectations for agricultural exports decreased from 67% to 58% in one month.
• Only 47% of farmers believe China will meet its import commitments from the Phase One agreement.

WEST LAFAYETTE, Ind. and CHICAGO, Oct. 6, 2020 /PRNewswire/ -- Farmer sentiment hit a post pandemic high in September, according to the Purdue University/CME Group Ag Economy Barometer. The index rose to a reading of 156, up 12 points from August and up 60 points from its 2020 low in April. The Current Conditions Index also saw an uptick, jumping 18 points to a reading of 142 in September, and the Future Expectations Index rose 9 points to a reading of 163. The Ag Economy Barometer is based on survey responses from 400 U.S. agricultural producers and was conducted between September 21-25, 2020.

This past month marked key changes in the agricultural economy. On September 18, USDA announced a second round of Coronavirus Food Assistance Program (CFAP 2) payments for U.S. agricultural producers and fall-harvested crop prices continued to strengthen considerably since late summer.

"In September, producers were more optimistic about both current conditions and the future for agriculture than they've been since the pandemic began," said James Mintert, the barometer's principal investigator and director of Purdue University's Center for Commercial Agriculture. "A continued crop price rally and the announcement of USDA's Coronavirus Food Assistance Program (CFAP 2) payments appear to be fueling much of their optimism."

However, that optimism did not completely carry over into perspectives toward the future of U.S. agriculture's trade prospects. In September, 58 percent of respondents said they expect agriculture exports to increase over the next 5 years, down from 67 percent who felt that way in August. The shift was primarily due to more producers indicating they expect exports to remain about the same in the future, rather than increase. In a related question, producers were asked whether they expect China to fulfill the food and agricultural import requirements established in the Phase One trade agreement signed earlier this year. Farmers' opinions were split, with less than half (47%) of respondents indicating they expect China to fulfill its commitment to import food and ag products from the U.S.

Given its increased attention in recent years, this month, producers were asked several questions about their intentions to use fall cover crops. Nearly 4 out of 10 corn/soybean producers in the September survey said they intend to plant at least some cover crops in fall 2020. As for their acreage intentions, over half (52%) said that they planned to plant cover crops on one-third or less of their corn/soybean acreage, 21% said they intend to plant between one-third to as much as two-thirds, and 27% intend to plant cover crops on more than two-thirds. Farmers who intend to plant cover crops this fall overwhelmingly (79%) said their primary reason for doing so was to improve soil health and crop yields, while just 1% of respondents said it was because of the availability of cost-share funds.

With many educational events and programs transitioning to online delivery, this month farmers were asked whether they have attended an online program and, if so, what aspects they liked and disliked. Twenty-two percent of respondents to the September survey said they attended an online educational program or field day this year. Respondents said they liked the flexible timing of attending and viewing the programs (27%) and the ability to choose topics of interest (21%). However, respondents overwhelmingly pointed to the lack of interaction with other attendees (40%), poor broadband connection (18%), and difficulty in asking questions (17%) as the top reasons they disliked these programs.

Read the full Ag Economy Barometer report at https://purdue.ag/agbarometer. This month's report includes insight into farmers' intentions towards making large investments in their farming operations in the coming year. The site also offers additional resources – such as past reports, charts and survey methodology – and a form to sign up for monthly barometer email updates and webinars.

Each month, the Purdue Center for Commercial Agriculture provides a short video analysis of the barometer results, available at https://purdue.ag/barometervideo, and for even more information, check out the Purdue Commercial AgCast podcast. It includes a detailed breakdown of each month's barometer, in addition to a discussion of recent agricultural news that impacts farmers. Available now at https://purdue.ag/agcast.

The Ag Economy Barometer, Index of Current Conditions and Index of Future Expectations are available on the Bloomberg Terminal under the following ticker symbols: AGECBARO, AGECCURC and AGECFTEX.

About the Purdue University Center for Commercial Agriculture
The Center for Commercial Agriculture was founded in 2011 to provide professional development and educational programs for farmers. Housed within Purdue University's Department of Agricultural Economics, the center's faculty and staff develop and execute research and educational programs that address the different needs of managing in today's business environment.

About CME Group
As the world's leading and most diverse derivatives marketplace, CME Group (www.cmegroup.com) enables clients to trade futures, options, cash and OTC markets, optimize portfolios, and analyze data – empowering market participants worldwide to efficiently manage risk and capture opportunities. CME Group exchanges offer the widest range of global benchmark products across all major asset classes based on interest rates, equity indexes, foreign exchange, energy, agricultural products and metals.  The company offers futures and options on futures trading through the CME Globex® platform, fixed income trading via BrokerTec and foreign exchange trading on the EBS platform. In addition, it operates one of the world's leading central counterparty clearing providers, CME Clearing. With a range of pre- and post-trade products and services underpinning the entire lifecycle of a trade, CME Group also offers optimization and reconciliation services through TriOptima, and trade processing services through Traiana.

CME Group, the Globe logo, CME, Chicago Mercantile Exchange, Globex, and E-mini are trademarks of Chicago Mercantile Exchange Inc. CBOT and Chicago Board of Trade are trademarks of Board of Trade of the City of Chicago, Inc. NYMEX, New York Mercantile Exchange and ClearPort are trademarks of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. BrokerTec, EBS, TriOptima, and Traiana are trademarks of BrokerTec Europe LTD, EBS Group LTD, TriOptima AB, and Traiana, Inc., respectively. Dow Jones, Dow Jones Industrial Average, S&P 500, and S&P are service and/or trademarks of Dow Jones Trademark Holdings LLC, Standard & Poor's Financial Services LLC and S&P/Dow Jones Indices LLC, as the case may be, and have been licensed for use by Chicago Mercantile Exchange Inc. All other trademarks are the property of their respective owners.

Writer: Kami Goodwin, 765-494-6999, kami@purdue.edu

Source: James Mintert, 765-494-7004, jmintert@purdue.edu   

Related websites:

Purdue University Center for Commercial Agriculture: http://purdue.edu/commercialag

CME Group: http://www.cmegroup.com/

Photo Caption: Ag Barometer rises as crop prices rally and USDA announces CFAP 2 (Purdue/CME Group Ag Economy Barometer/James Mintert)

A publication-quality photo is available at https://www.purdue.edu/uns/images/2020/barometer-septemberLO.jpg.

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SOURCE CME Group

FAQ

What is the latest Ag Economy Barometer reading for September 2020?

The Ag Economy Barometer rose to 156 in September 2020, up 12 points from August.

Why did farmer sentiment increase in September 2020?

The increase in farmer sentiment was primarily due to rising crop prices and USDA's CFAP 2 payments.

What percentage of farmers expect agricultural exports to increase?

58% of farmers expect agricultural exports to increase, down from 67% in August.

How many farmers plan to use cover crops this fall?

Nearly 40% of corn/soybean producers plan to plant cover crops for the 2020 fall season.

What challenges do farmers face with online educational programs?

Farmers reported issues like lack of interaction (40%) and poor broadband connection (18%) with online programs.