There was a big improvement in farmer sentiment in August, according to the Purdue University/CME Group Ag Economy Barometer, which is based on survey responses from 400 U.S. agricultural producers The index rose to a reading of 144, up 26 points from July.
Both of the barometers sub-indices also recorded substantial increases. The Index of Current Conditions improved to a reading of 124, up 13 points from July, while the Index of Future Expectations improved to a reading of 154, up 33 points.
Increases in the barometer and its two sub-indices marked the most positive readings since February 2020 when record highs were established and before the pandemic began. The improvement in sentiment was also underpinned by expectations for excellent crop yields, as reported in the USDA's August “Crop Production” report, and rallies in key agriculture commodity prices that took place this month.
"This month marked a considerable increase in farmer sentiment," said James Mintert, the barometer's principal investigator and director of Purdue University's Center for Commercial Agriculture. "With a positive crop production outlook, rebounding commodity prices, and news of additional export sales to China, producers were much more optimistic about the future for the U.S. agricultural economy."
Farmers were more optimistic about U.S. agriculture's trade prospects compared to the past several months. In August, 67% of producers said they expect exports to rise over the next five years, compared to just 57% who felt the same way during the spring and summer months of 2020. Mintert attributed this change in perspective in part to rising export sales to China that began over the summer and now appear likely to continue into fall.
Farmers' perspectives toward land values also improved in August. Those expecting land values to increase over the next 12 months rose to 20% in August, up from 16% in July and 7% back in April. The percentage of producers expecting values to increase in the next five years rose to 59%, up from 48% in July and just 40% who expected higher values back in May.
Each summer survey respondents are asked their opinion regarding changes in farmers' equity position over the upcoming year. The percentage of respondents in the August 2020 survey who expect equity to decline in the upcoming 12 months was 38%. This marked the second lowest percentage since the survey question was first asked in 2016 and was well below a year earlier when 48% of respondents said they expected farmers' equity to decline.
The Farm Capital Investment Index rose 5 points in the latest barometer compared to a month earlier to a reading of 65. Similar to the other indices, this was the most positive reading since February. When asked specifically about plans to purchase farm machinery in the upcoming year, fewer farmers (48%) in August reported that they plan to reduce their purchases this year than in prior months. The economists who compile the results said it is worth noting that while 48% is a high percentage of farmers who plan to hold back on machinery purchases, this percentage has been declining since reaching a peak of 65% in May.