The Purdue/CME Group Ag Economy Barometer fell to 125 in April, which was 10 points lower than a month earlier and 15 points below its February reading. The sharp drop in the ag producer sentiment index, which is based upon a monthly a survey of 400 agricultural producers from across the U.S., was attributable to producers’ weakening perceptions of current conditions in the production agriculture sector, along with a decline in their expectations for future economic conditions. The Index of Current Conditions fell to 123, 11 points lower than in March, and the Index of Future Expectations declined 9 points to 126. Both the Ag Economy Barometer and the Index of Future Expectations hit their lowest readings since March 2017 and the Index of Current Conditions was at its lowest level since May 2017.
The undercurrent of concern expressed by producers in March became more pronounced in April as the trade dispute with key export customer China continued. For example, compared to February of this year, producers in April were more negative about future agricultural export prospects. In February 2018, when asked to look ahead 5 years, 13 percent of producers said they expected agricultural exports to decline. When the same question was posed in April, the share of producers expecting lower exports increased to 17 percent.
Producers’ perspectives regarding crop prices deteriorated markedly compared to earlier in the year. The impact was most pronounced in soybeans. Soybean prices are particularly vulnerable to disruptions in trade with China, as China’s share of U.S. soybean exports is approximately 30 percent. The share of producers expecting soybean prices to decline in the year ahead rose to 27 percent in April compared to just 15 percent who said they expected prices to decline when the same question was posed back in January. Moreover, when producers were asked about the likelihood of November 2018 CBOT soybean futures trading below $9.50 per bushel between April and fall 2018, over half (53 percent) of producers said they expected the fall futures contract to fall below $9.50, representing a decline of over $0.75 per bushel from where the contract was trading during the survey period. A decline of that magnitude would push soybean prices below many producers’ breakeven price level.
The full Purdue/CME Group Ag Barometer report can be found here in its entirety. This report was published by Purdue University’s James Mintert, David Widmar and Michael Langemeier.