Farmer sentiment rebounds as commodity prices rally and agriculture trade prospects improve

Rhea-AI Summary

Farmer sentiment in the U.S. saw a notable increase in August, with the Ag Economy Barometer rising to 144, a 26-point gain from July. This reflects optimism driven by favorable crop yield expectations and rising commodity prices. Both the Index of Current Conditions (up to 124) and the Index of Future Expectations (up to 154) experienced significant increases. Moreover, a surge in export expectations, particularly to China, contributed to a brighter outlook. The proportion of farmers anticipating land value increases rose, and concerns over equity decline reached a low since 2016.

Positive

• Ag Economy Barometer rose to 144, a 26-point increase from July.
• Index of Current Conditions improved to 124, up 13 points.
• Index of Future Expectations increased to 154, up 33 points.
• 67% of producers expect exports to rise over the next five years versus 57% previously.
• Expectation of land value increase rose to 20%, up from 16% in July.
• 38% expect equity decline, the second lowest since 2016.

Negative

• None.

WEST LAFAYETTE, Ind. and CHICAGO, Sept. 1, 2020 /PRNewswire/ -- There was a big improvement in farmer sentiment in August, according to the Purdue University/CME Group Ag Economy Barometer. The index rose to a reading of 144, up 26 points from July. The Ag Economy Barometer is based on survey responses from 400 U.S. agricultural producers and was conducted between August 17-21, 2020.

Both of the barometers sub-indices also recorded substantial increases. The Index of Current Conditions improved to a reading of 124, up 13 points from July, while the Index of Future Expectations improved to a reading of 154, up 33 points.

Increases in the barometer and its two sub-indices marked the most positive readings since February 2020 when record highs were established and before the pandemic began. The improvement in sentiment was also underpinned by expectations for excellent crop yields, as reported in the USDA's August Crop Production report, and rallies in key agriculture commodity prices that took place this month.

"This month marked a considerable increase in farmer sentiment," said James Mintert, the barometer's principal investigator and director of Purdue University's Center for Commercial Agriculture. "With a positive crop production outlook, rebounding commodity prices, and news of additional export sales to China, producers were much more optimistic about the future for the U.S. agricultural economy."

Farmers were more optimistic about U.S. agriculture's trade prospects compared to the past several months. In August, 67 percent of producers said they expect exports to rise over the next five years, compared to just 57 percent who felt the same way during the spring and summer months of 2020. Mintert attributed this change in perspective in part to rising export sales to China that began over the summer and now appear likely to continue into fall.

Farmers' perspectives toward land values also improved in August. Those expecting land values to increase over the next 12 months rose to 20 percent in August, up from 16 percent in July and 7 percent back in April. The percentage of producers expecting values to increase in the next five years rose to 59 percent, up from 48 percent in July and just 40 percent who expected higher values back in May.

Each summer survey respondents are asked their opinion regarding changes in farmers' equity position over the upcoming year. The percentage of respondents in the August 2020 survey who expect equity to decline in the upcoming 12 months was 38 percent. This marked the second lowest percentage since the survey question was first asked in 2016 and was well below a year earlier when 48 percent of respondents said they expected farmers' equity to decline.

Read the full Ag Economy Barometer report at https://purdue.ag/agbarometer. This month's report includes insight into farmers' intentions towards investing in farm machinery in the coming year and their thoughts on attending virtual events like field days and conferences this fall and winter. 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. 

CME-G

Writer: Kami Goodwin, 765-494-6999, kami@purdue.edu  
Source: James Mintert, 765-494-7004, jmintert@purdue.edu

Media Contacts:
Aissa Good, Purdue University, 765-496-3884, aissa@purdue.edu
Dana Schmidt, CME Group, 312-872-5443, dana.schmidt@cmegroup.com

Related websites:
Purdue University Center for Commercial Agriculture: http://purdue.edu/commercialag
CME Group: http://www.cmegroup.com/

Photo Caption: Farmer sentiment rebounds as commodity prices rally and agriculture trade prospects improve
(Purdue/CME Group Ag Economy Barometer/James Mintert)

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

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SOURCE CME Group

FAQ

What is the Ag Economy Barometer reading for August 2020?

The Ag Economy Barometer reading for August 2020 is 144, a 26-point increase from July.

How have farmer sentiments changed regarding land values?

In August, 20% of farmers expect land values to increase, up from 16% in July.

What percentage of producers expect exports to rise in the next five years?

67% of producers expect exports to rise over the next five years, compared to 57% earlier in 2020.

When was the Ag Economy Barometer last higher than 144?

The last time the Ag Economy Barometer was higher than 144 was in February 2020.

What factors contributed to the increase in farmer optimism?

The increase in optimism is attributed to expected excellent crop yields and rising commodity prices.