Farmer sentiment pulls back post-election: regulation, trade, and taxes rated as top concerns
The Purdue University/CME Group Ag Economy Barometer fell 16 points to 167 in November, driven by a pessimistic outlook on the agricultural economy. The Index of Future Expectations dropped 30 points to 156, contrasting with a 9-point rise in the Index of Current Conditions, reaching an all-time high at 187. Survey results indicated growing concerns about tighter environmental regulations, increased taxes, and insufficient government support for the ethanol industry. Furthermore, expectations regarding the U.S.-China trade dispute worsened, with only 50% of respondents anticipating a favorable outcome.
- Index of Current Conditions rose by 9 points to an all-time high of 187.
- Continuing support from commodity price rallies and CFAP-2 payments bolstered current economic conditions.
- Ag Economy Barometer decreased by 16 points, reflecting growing pessimism.
- Index of Future Expectations dropped significantly by 30 points to 156.
- Only 50% of farmers expect a favorable resolution to the U.S.-China trade dispute, down from 80%.
- Concern over potential tighter environmental regulations and increased taxes affecting agricultural operations.
WEST LAFAYETTE, Ind. and CHICAGO, Dec. 1, 2020 /PRNewswire/ -- The Purdue University/CME Group Ag Economy Barometer dropped 16 points to a reading of 167 in November, down from its all-time high set just one month ago. The decrease in sentiment was led by farmers' more pessimistic view towards the future of the agricultural economy with the Index of Future Expectations falling 30 points to a reading of 156 in November. The on-going rally in commodity prices and CFAP-2 payments continued to support producers' view of current economic conditions as the Index of Current Conditions rose 9 points in November to 187, an all-time high for the index.
The Ag Economy Barometer is calculated each month from 400 U.S. agricultural producers' responses to a telephone survey. This month's survey was conducted after the election from November 9-13, 2020.
"Producers were more pessimistic about future economic conditions on their farms in November than they were just a month earlier," said James Mintert, the barometer's principal investigator and director of Purdue University's Center for Commercial Agriculture. "This is the opposite of what happened following the November 2016 election. That year producers became much more optimistic about the future following the election and, in turn, that optimism about the future helped drive the Ag Economy Barometer up sharply in late 2016 and early 2017."
To learn more about what factors might be motivating the shift in producers' sentiment pre- and post-November election, a series of questions focused on producers' future expectations for environmental regulations, taxes and other key aspects of the agricultural economy, were included on both the October and November surveys. Comparing results from October to November, far more producers in November said they expect to see: 1) environmental regulations impacting agriculture to tighten over the next five years; 2) higher income tax rates for farms and ranches; 3) higher estate tax rates for farms and ranches; 4) less government support for the U.S. ethanol industry and 5) a weaker farm income safety net provided by U.S. government program policies. For a complete breakdown of the results, view the full November Ag Economy Barometer report.
Since the summer of 2019, Purdue researchers have been tracing producers' perceptions regarding the ongoing trade dispute between the U.S. and China–specifically, whether they think the dispute will be resolved soon and the outcome will ultimately benefit U.S. agriculture. In January and February of this year, 80 percent of survey respondents said they expected to see the trade dispute with China be resolved in a way that benefits U.S. agriculture. However, on the November survey, the percentage of farmers expecting a favorable outcome for U.S. agriculture declined to 50 percent, the lowest percentage recorded since the question was first included on a barometer survey. In a related question, only 44 percent of respondents to the November survey said they think it's likely that China will fulfill the Phase One Trade Agreement requirements, down from 59 percent a month earlier.
Read the full Ag Economy Barometer report at https://purdue.ag/agbarometer. This month's report also asked farmers about their intentions on making large investments in their farming operations as well as their expectations for farmland values in the next 12-months and five-years. 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.
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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 1: Farmer sentiment pulls back post-election: regulation, trade, and taxes rated as top concerns. (Purdue/CME Group Ag Economy Barometer/James Mintert) https://www.purdue.edu/uns/images/2020/AgEconomyBarometer_Nov2020_1LO.jpg
Photo Caption 2: Farmer expectations regarding changes in policies affecting U.S. Agriculture in the next 5 years, October vs. November 2020. (Purdue/CME Group Ag Economy Barometer/James Mintert) https://www.purdue.edu/uns/images/2020/AgEconomyBarometer_Nov2020_2LO.jpg
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SOURCE CME Group
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