The lowest reading since October 2016
Farmer sentiment has dropped to a two-year low, erasing all improvements recorded following the November 2016 election, according to Purdue University reports.
The Purdue University Ag Economy Barometer declined 14 points in May from a reading of 115 in April before trade negotiations with China deteriorated. This is the lowest level since October 2016.
Purdue University researchers say the decrease can be attributed to U.S. producers’ perspectives on both current and future economic conditions.
“Ag producers are telling us the agricultural economy weakened considerably this spring as the barometer has fallen 42 points (29%) since the start of this year,” said James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture. “Farmers are facing tough decisions in the midst of a wet planting season and a lot of uncertainty surrounding trade discussions.”
In North Central Indiana, Curt Campbell, Purdue Extension director in Wabash County, said the combination of poorly-drying soil, heavy rains and a loss of markets because of trade negotiations are to blame for the dreary outlook. He said the recent news of possible tariffs on Mexican imports could drop sentiment even lower.
“We don’t know what the trade situation is going to be and what’s going to happen,” he said. “Sometimes farmers want to me optimistic, but sometimes they think the worst too.”
Farmers are used to uncertainty, Campbell says, but he said this year has thrown a lot of variables at them. Campbell said farmers have a lot of tough decisions to make in a short amount of time, since the prime time to plant corn was May 20 and the window to plant soybeans is closing in quickly.
“I think farmers as a whole look at it as a failure to not get out there to plant … but not planting might be their best alternative … They’ve got to (decide) now,” Campbell said.
If farmers don’t plant their corn before Monday, Campbell said farmers “should probably consider not planting corn.”
The United States Department of Agriculture announced a market facilitation program shortly after the ag barometer was released, but Campbell said the $50-$80-per-acre payment wouldn’t have likely changed farmer sentiment.
“I don’t see it as a lifesaver for a lot of farmers,” he said. “It might help some of the cost, but it’s not going to be a great deal.”
Farmers will only receive the assistance package for planted acres, he says, so he said farmers need to consider all options.
Purdue University released a video on planting decisions Thursday, and Campbell said farmers can contact their extension office if they need access to the recording.
He said the insurance payments for not planting could bring up to $300 per acre, which saves farmers from spending on seed and other variable costs.
“In a lot of scenarios, that’s probably the better way to go than to plant corn later,” he said. “It’s kind of hard to say.”
Farmers are less likely to invest this year as well. In May, just 18% of farmers stated it was a “good time” to make large farm investments while 81% stated it was a “bad time,” according to the Large Farm Investment index. This is the lowest reading since October 2015 when the Ag Economy Barometer began.
“Farmers’ optimism toward short- and long-term farmland values has also waned since the early part of 2019,” a Purdue University press release stated. “For example, the percentage of farmers who expect farmland values to decline over the course of the upcoming year jumped from 21% in January to 25% in March and most recently to 30% in May. Looking farther ahead, just 39% of producers said they expect farmland values to rise over the next five years, compared to 48% expecting rising values in the March survey.”
Trade continues to be the largest source of concern for producers, researchers say. When farmers were asked if they feel trade negotiations will create a favorable outcome to U.S. agriculture, 77% said yes in March, 71 percent said yes in April and only 65% said yes in May.