Improving crop conditions after an extraordinarily wet planting season, combined with a late-spring/early-summer crop price rally, boosted farmer sentiment in July 2019, according to the latest Purdue University/CME Group Ag Economy Barometer. The reading, which is based on a survey of 400 agricultural producers across the U.S., jumped to 153 in July, up 27 points from June and up 52 points from May.
This improvement occurred despite the fact that many producers were in the midst of filing prevented planting crop insurance claims and wondering about the size of the U.S. Department of Agriculture’s 2019 Market Facilitation Program payments.
A big driver of sentiment was producers’ improved expectations for current economic conditions. The Index of Current Conditions, a sub-index of the barometer, increased 44 points in July to a reading of 141, marking the largest one-month improvement since data collection began in October 2015. The barometer’s other sub-index, the Index of Future Expectations, also increased, rising 18 points from June to a reading of 159 in July.
“The Corn Belt is continuing to see better crop conditions, and that has farmers, at least momentarily, breathing a sigh of relief. However, the agricultural economy is still in flux,” said James Mintert, the barometer’s principal investigator and director of the Purdue University Center for Commercial Agriculture. “The impact of prevented planting on 2019 corn and soybean acreage and prices, along with the outcome of trade talks with China, remain unknown.”
As a result of the late planting season and the possibility of large prevented planting acreage not captured in the agency's June "Acreage" report, USDA announced that it would re-survey farm operations in nearly all major corn and soybean states during July to better estimate actual planted acreage of both crops. The results from that survey will not be available until mid-August.
To help fill the information void, this barometer survey asked growers if they are taking a prevented planting payment on any of the corn or soybean acreage they intended to plant in 2019. Although USDA extended the deadline to report prevented plantings to July 22 in affected states, most farmers completed their prevented planting claims by USDA’s original deadline of July 15 and were able to provide an accurate reading on their prevented planting acreage when this ag barometer survey was conducted.
Twenty-five percent of corn/soybean growers surveyed said they are filing a prevented planting claim on some of their intended corn acreage, while 24% said they are filing a prevented planting claim on some of their soybean acreage.
In a follow-up question, producers who indicated that they submitted a claim were asked what percentage of their intended acreage they will claim as prevented planting. Sixty-one percent of the farmers filing a claim for corn said prevented planting totaled 15% or more of their intended corn acreage, and 42% said they did not plant 25% or more of their intended acreage. Meanwhile, 39% of soybean growers submitting a prevented planting claim said they did not plant 15-25% of their intended soybean acreage. In contrast to corn growers, however, just 2% of soybean farmers with a prevented planting claim said they were unable to plant 25% or more of their intended soybean acreage.
Producers were also asked whether they feel that now is a good time or a bad time to make large investments in their farming operations. In July, the Large Farm Investment Index improved to a reading of 67, up 25 points from June and 30 points from May. This increase marked both the largest two-month improvement in the index since data collection began in the fall of 2015 and the highest reading for the index since February 2018. Sentiment also spilled over into expectations for increased land values. Short term, the percentage of producers expecting land values to increase in the upcoming 12 months jumped from just 10% in June to 21% in July, the highest since February 2018. Long run, 53% of producers said they expect values to rise over the next five years, compared to 45% who felt that way in June and 39% in May.
Each summer, the survey also asks farmers about the prospects for farming operations in their area to increase in size over the upcoming 12 months and the next five years. This year, the survey revealed that improved farmer sentiment this July seemed to spill over into improved expectations for future growth opportunities. For example, in July 2018, just 12% of respondents said they expected growth opportunities in the next year to increase, but in July 2019, this rose to 23%. Similarly, when asked to look ahead five years, nearly half of respondents (49%) this year said they expected greater growth opportunities, compared to just 34% who felt that way in July 2018.