The latest measure of agricultural producer sentiment improved slightly during October to 135, up three points from September and the third-highest level since data collection began two years ago, according to a monthly survey of 400 agricultural producers from across the U.S.
Despite the improvement from the prior month, the Purdue/CME Group Ag Economy Barometer remained within the trading range it has been in since last February, fluctuating between a low of 124 and a peak of 139. The improvement was driven by the Index of Future Expectations, which increased from 130 in September to 137 in October. The Index of Future Expectations is one of the barometer's two sub-indices. The other, the Index of Current Conditions, weakened slightly.
For the second year in a row, producers were asked whether they plan to make management changes, such as lowering fertilizer or seeding rates or adjusting their hybrid or variety packages for the upcoming cropping season. The share planning reductions in seeding rates and changes to their hybrid or variety choices for 2018 changed little from last October, with 19% expecting lower seeding rates and 35% planning to adjust seed variety or hybrid packages. The percentage of producers planning to reduce fertilizer usage in 2018, however, was noticeably smaller. Just one-third of respondents said they plan to reduce fertilizer rates in 2018, down from 46% a year ago.
"One possible reason for the smaller share of producers planning to reduce fertilizer rates in 2018 is prices," said James Mintert, director of Purdue's Center for Commercial Agriculture and principal investigator on the barometer project. "Fertilizer prices, particularly for anhydrous ammonia, are lower than a year ago. For example, recent price quotes for anhydrous ammonia were 20% lower than a year ago, with other crop nutrient prices exhibiting smaller price declines."
In terms of overall expenses, 62% of producers reported that they expect no change in the upcoming year. Even with tightening margins, only 31% of respondents expect their expenses to increase in 2018 compared to a year earlier.
As for crop price expectations in the coming year, fewer producers expect higher corn, soybean and wheat prices in the next 12 months compared to July’s survey. However, fewer producers also expect crop prices to decline over the next year. October marked the smallest share of producers expecting lower prices for soybeans, wheat and cotton in the year ahead since data collection began in October 2015.
For the first time, producers were asked about their expectations for farmland rental expenses in 2018. An overwhelming 80% of respondents said they expect farmland rental rates to be unchanged in 2018 compared to 2017. The remaining 20% of respondents were split equally between those expecting rental rates to be higher and those expecting rates to be lower in 2018.
For farm machinery, the share of producers rating machinery prices as high — a rating of six to nine — increased, while the share of producers rating prices as low — a rating of one to four — declined. In October, 58% of respondents rated used farm machinery prices as high, the highest percentage since data collection began in early 2016, but the share of producers rating prices as low fell from a life-of-survey high of 27% in July 2017 to a life-of-survey low of 11% in October.
Purdue University agricultural economists suggested that the shift in perception regarding used farm machinery values could be an indicator that used machinery values are strengthening.
“Anecdotal evidence from some Corn Belt farm equipment dealers suggests that sales volume during 2017 improved, which is consistent with producer responses on the survey,” they noted.