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Farms showing financial stress; producers concerned about future

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Survey shows 20% of producers said they expect their farm's performance to be worse than in 2018.

Producer sentiment weakened slightly in late winter, according to the Purdue University/CME Group Ag Economy Barometer reading for March. The barometer, which is based on a survey of 400 U.S. agricultural producers, declined from 136 in February to a reading of 133 in March.

"This month's drop is largely due to producers' weaker outlook regarding future economic conditions in agriculture and, in some cases, stress regarding their farm's future financial performance," said James Mintert, the barometer's principal investigator and director of the Purdue University Center for Commercial Agriculture.March ag barometer 2019.jpg

The Index of Future Expectations dropped six points, from a reading of 145 to 139, while the Index of Current Conditions remained relatively unchanged at 120.

Financial stress continues to be a concern in the production agriculture sector, the survey revealed. When asked about their financial performance expectations for 2019 compared to the previous year, 59% of producers expect their farm's performance to be "about the same," and 21% actually expect "better" financial performance. However, 20% of producers said they expect their farm's performance to be "worse than" in 2018. Responding to a separate question, just more than half (52%) of respondents indicated that they are less optimistic about their farm's financial future compared to a year earlier.

To learn more about financial conditions on U.S. farms, Purdue researchers asked producers about their operating debt in both the January and March 2019 surveys. Results suggest that 5% to as much as 7% of U.S. farms are suffering from some financial stress, using the need to carryover unpaid operating debt as a financial stress indicator. In March, of the 22% of farms that expect to have a larger operating loan in 2019, just more than one in five said it was the result of carrying over a previous year's unpaid operating debt.

In contrast to the concerns expressed about financial performance in the March survey, producers seem more optimistic about the future of agricultural exports. Only 8% of producers in the March survey said they expect agricultural exports to decrease in the next five years. Meanwhile, 68% expect exports to increase, which was the most optimistic perspective on agricultural exports provided by farmers since the Purdue researchers began posing questions on exports in May 2017.

With respect to the trade dispute with China, 77% of producers were confident that it will be resolved in a way that benefits U.S. agriculture; however, less than half expect the trade situation with China to be resolved before July 1.

Read the full March Ag Economy Barometer report here.

TAGS: Business
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