In the newest Purdue and CME Group Ag Economy Barometer there has been a reversal. The August barometer measured a significant decline to 95, dropping 17 points from July. David Widmar, Senior Research Associate at the Purdue Center for Commercial Agriculture told HAT they see a shift in producer tone with the future expectations index really driving the barometer lower.
“I really think that what we saw is this run of low commodity prices, corn trading around that 3.25 on the board of trade, getting close to sub-3 in a lot of areas of the country, really saw producers shifting from saying how high can corn be in July to how low can corn be in August. So that really started to shift and started to bring down a lot of this long run optimism that maybe there can be some good times coming in agriculture to now maybe saying how tough is it going to be.”
Good growing conditions and then the August crop report from USDA cemented the erosion in sentiment.
“We started in June and had some dryness. We had some soybean sales pick up from dry concerns and short yields in South America, so we saw things really picking up there in June. Then from the middle of June all the way through the USDA report in August we had this tone of actually favorable weather, strong yields of corn and soybeans. So those two things kind of transitioned and of course the USDA report came out with close to 175 bushels per acre on corn, and that really cemented a lot of that thought.”
He said one surprise coming from the August responses was the expectation of input prices in 2017.
“The price of seed, the price of fertilizer and the price crop protection products in 2017, across all those products, more producers thought that higher prices were likely relative to lower prices.”
The barometer is based on a monthly survey of 400 U.S. agricultural producers and includes measures of sentiment toward current conditions and future expectations. Both of those indices dropped in August. The Index of Current Conditions fell from 93 in July to 80 in August and the Index of Future Expectations dropped to 102 from July’s 121.