New 'barometer' tracks confidence in ag economy

Index calculated based on agricultural producer sentiment about both current conditions and future expectations.

May 3, 2016

2 Min Read
New 'barometer' tracks confidence in ag economy

The Purdue/CME Group Ag Economy Barometer launched this week through a partnership between Purdue University’s Center for Commercial Agriculture and the derivatives marketplace CME Group. It will provide agricultural stakeholders with a monthly measure of the health of the U.S. agricultural economy.

The introduction of this new national economic indicator underscores the importance of the agricultural economy and its participants – food producers and agribusinesses – to the overall U.S. and global economies, Purdue and CME Group said in announcing the partnership.

“Agriculture is a critical component of the global economy and has been the cornerstone of CME Group’s business for nearly 170 years,” CME executive chairman and president Terry Duffy said. “By providing financial tools to help producers and agribusiness participants manage the risks they face, they are better able to focus on what they do best: feeding the world. We believe this collaboration with Purdue University to create the Purdue/CME Group Ag Economy Barometer will provide an essential resource for monitoring the health of the food industry and vital insight into the global economy.”

Purdue president Mitch Daniels said, “We can imagine no better partner than CME Group to help us analyze and report the real-time economic health of U.S. agriculture, on which literally every citizen and the rest of the economy depends.”

Each month, the Ag Economy Barometer will provide a sense of the agricultural economy’s health via an index value. Results to calculate the index are obtained through a survey on the economic sentiment of 400 large agricultural producers.

Additionally, Purdue will use its research and agricultural economics expertise to measure producers’ expectations of key farm economy drivers, such as farm profitability, farmland prices, capital expenditures, row-crop, livestock and dairy prices and seasonal drivers such as seed, fertilizer and feed ingredient prices.

The barometer provides a value for each month that is relative to the base period, which is the winter and spring months of 2015 and 2016, explained Jim Mintert, director of Purdue’s Center for Commercial Agriculture, professor of agricultural economics and principal investigator for the barometer. A score of 100 would mean that the sentiment is unchanged from the base period values, higher than 100 means that sentiment improved from that period and lower values indicate that sentiment declined.

Quarterly, the index will be accompanied by a webinar and in-depth survey of 100 agricultural thought leaders, including agricultural lenders, business professionals, academics, consultants and commodity association representatives. This survey will be separate from the results of the producer survey but serves as a supplement to the barometer.

“The barometer is the only ongoing monthly measure of the health of the agricultural economy,” Mintert said. “Also unique is that the index is calculated based on producer sentiments about both current conditions and future expectations.”

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