The Purdue University/CME Group Ag Economy Barometer, which is based on a mid-month survey of 400 U.S. crop and livestock producers, was nearly unchanged in December, dropping only three points from November to a reading of 150. However, producer sentiment toward current conditions of the agricultural economy dropped 12 points in December, barometer results revealed. The Index of Current Conditions registered a reading of 141, down from 153 in November. Meanwhile, the Index of Future Expectations remained strong, up two points in December to a reading of 155.
"Agricultural producers in December were less optimistic about current economic conditions on their farms than a month earlier but remained optimistic about future economic conditions," said James Mintert, the barometer's principal investigator and director of Purdue University's Center for Commercial Agriculture.
In the December survey, producers were asked whether their farm's 2019 financial performance was better, as expected or worse than their initial budget projections. Just over half (52%) stated that their initial projections matched their farm's financial performance, 30% stated that it was worse and 19% said it was better than expected.
"These results are indicative of the variability in economic conditions on U.S. farm operations, with some farms performing better than expected and others worse than expected," Mintert said.
To better assess the level of financial stress among U.S. farms, producers were asked in both the November and December surveys whether they expected their farm's 2020 operating loan to be larger, about the same or smaller than in 2019. In a follow-up, those who expected a larger loan were asked why they expected their loan to increase. Approximately one out of five farmers on the two surveys indicated that they expect to have a larger operating loan in 2020 compared to 2019, and of those, three out of 10 indicated that the reason for the larger loan is unpaid operating debt from 2019. Carrying over unpaid operating debt from year to year is an indicator of financial stress, and these results suggest that about 6% of farms surveyed for the Ag Barometer in late 2019 were experiencing financial stress.
Most producers surveyed said they expect stable cash rental rates in 2020. From October through December, producers were asked whether they expect changes in rental rates in the coming year. More than three-quarters of survey respondents said they do not expect a change, 8-9% expect a rise and 13-14% expect a decline in rental rates.
Regarding farmland values, farmers surveyed in December were somewhat less optimistic on the price direction than indicated in November’s survey. The percentage of respondents who expect higher farmland values, both in the upcoming year and the next five years, declined in December compared to a month earlier. Similarly, more respondents in December said they expect future farmland values to decline in the year ahead and five years ahead versus the November survey. Sentiment regarding the direction of farmland values rebounded sharply from the very negative sentiment expressed in May, leaving expectations in December nearly unchanged from the beginning of 2019.
Producers remained relatively optimistic that a resolution to the ongoing trade dispute with China will take place soon and that the outcome of the dispute will benefit U.S. agriculture. In December, 54% of respondents stated they expect a resolution to the trade dispute soon, which, although down from 57% in November, was still the second most positive response to this question since last March. The percentage of producers who expect that the outcome will ultimately favor U.S. agriculture dropped to 72% from 80% in November. Since this question was first posed in March 2019, more than 70% of respondents have, on average, indicated that they expect a favorable outcome to the trade dispute for U.S. agriculture.