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Ag Producer Sentiment Drops to Lowest Level in May

Producers' perspectives on current, future economic conditions worsened considerably

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Ag producer sentiment in May dropped to its lowest level since October 2016, erasing all improvements recorded following the November 2016 election. The Purdue University/CME Group Ag Economy Barometer, based on a mid-month survey of 400 agricultural producers across the U.S., declined 14 points in May to a reading of 101, down from 115 in April.

The decline in the barometer came about because producers' perspectives on both current and future economic conditions worsened considerably compared to a month earlier. The Index of Current Conditions fell to a reading of 84, down from 99, and the Index of Future Expectations fell to 108, down from 123. Farmer's perceptions regarding the agricultural economy weakened considerably this spring as the barometer (through May) has fallen 42 points (29%) since the start of this year.

The Large Farm Investment Index, which measures producers' attitudes toward making large investments in their farming operation, has ebbed and flowed over the past year; however, since the beginning of 2019, the index has trended significantly lower. 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," pushing the investment index down to a reading of 37. This is the lowest Large Farm Investment Index reading since the Ag Economy Barometer's October 2015 inception.

Farmer's optimism toward short- and long-term farmland values has also waned since the early part of 2019. For example, the percentage of farmers that expect farmland values to decline over the course of the upcoming year climbed from a low of 20% in February to 25% in March and most recently to 30% in May. Looking further ahead, in May just 39% of producers said they expect farmland values to rise over the next five years, compared to 48% that said they expected values to rise when surveyed back in March.

Agricultural trade continues to be a source of concern for producers. For the past three months, producers were asked whether they expect the soybean trade dispute with China to be resolved by July 1 and whether they feel the resolution will benefit U.S. agriculture. When the question was first posed in March, 45% of respondents expected the dispute to be resolved by July 1; that number declined to 28% in April and fell further to 20% in May.

Regarding whether they ultimately expect an outcome favorable to U.S. agriculture, 77% said yes in March, which declined to 71% in April, and fell further to 65% in May. So, a majority of producers still expect a favorable outcome to the trade dispute for agriculture, but that majority appears to be shrinking.

Read the full May Ag Economy Barometer report here.

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