April survey results show improvement in producer sentiment due to higher prices and favorable weather.

May 6, 2016

3 Min Read
Purdue, CME launch monthly ag economy confidence 'barometer'

The Purdue University Center for Commercial Agriculture and the derivatives marketplace CME Group are partnering to produce the Purdue/CME Group Ag Economy Barometer, a monthly measure of the health of the U.S. agricultural economy.

The introduction of this 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 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.”

April survey results

The agricultural sentiment of U.S. producers increased to 106 in April 2016, which was an improvement in producer sentiment compared to the base period of October 2015 through March 2016. The increase was driven in part by strengthening corn, soybean and wheat prices. After months of trending lower and a sharp drop in corn prices following the U.S. Department of Agriculture’s March “Prospective Plantings” report, crop prices moved higher during April. Additionally, general weather conditions across the Plains and Midwest were favorable for crop development and planting and likely contributed to the improved sentiment.

“While the most recent data show an uptick in producers’ sentiment, it is important to keep the situation in perspective,” said David Widmar, senior research associate for the Center for Commercial Agriculture and lead researcher on the Ag Economy Barometer. “Overall, the general agricultural outlook is still difficult. A strong majority of respondents, from both the producer and quarterly 'Agricultural Thought Leaders' survey, reported expectations of the next 12 months being ‘bad times’ financially across the agricultural sector.”

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