Producers concerned about possibility of a trade war erupting that could negatively affect ag exports.

April 4, 2018

2 Min Read
Ag barometer finds trade woes dampening ag outlook
Feedstuffs

Uncertainty around trade relations and possible implications for U.S. agricultural exports dampened producer sentiment, according to the latest Purdue University/CME Group Ag Economy Barometer released April 3.

The barometer fell to 135 in March, with a five-point decline coming as a result of producers’ less-optimistic perceptions of both current conditions and future expectations. The Index of Current Conditions fell nine points in March to 134, while the Index of Future Expectations dropped four points to 135. The barometer and both sub-indices are based on a monthly survey of 400 U.S. agricultural producers.

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“In the March survey results, it’s clear that a large portion of producers are concerned about the possibility of a trade war erupting that could negatively impact ag exports,” the report noted.

In the March survey, producers expressed both concern and uncertainty surrounding trade. Nearly half (47%) of respondents said a trade war negatively affecting agricultural exports was somewhat likely, compared with just 28% who thought it was unlikely. The remaining 25% indicated uncertainty with a neutral rating.

Producers also were asked about the likelihood of the U.S. withdrawing from the North American Free Trade Agreement (NAFTA). More than one-third expressed uncertainty, while 28% expect the U.S. to remain in NAFTA and 34% said they expect the U.S. to exit the agreement.

Related:China targets U.S. soybeans in second round of retaliations

“Interestingly, when comparing results from the two trade questions, a larger share of respondents reported a significant decline in agricultural exports from a trade war was more likely than the U.S. withdrawing from NAFTA,” said James Mintert, director of Purdue University’s Center for Commercial Agriculture and principal investigator on the barometer project. “These results are important for two reasons. First, nearly half of producers rated the risk of a trade war as at least somewhat likely. Second, producers’ concerns about risks to agricultural trade are broader than just the ongoing NAFTA situation.”

The March survey also asked producers whether they thought now was a good time to make large farm investments, such as for machinery or buildings. At 68%, the portion of producers indicating that now is a bad time to make large investments is at the highest level observed since May 2017. Mintert said this could be related to the trade situation.

“Concerns about agricultural exports, especially as they relate to China's tariffs on U.S. ag products, could be one reason why fewer producers said now is a good time to make large farm investments,” he said.

Related:China's ag retaliatory tariffs become reality

Read the full March Ag Economy Barometer report at http://purdue.edu/agbarometer.

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