Ag Barometer Drops on Increased Farmer Pessimism

The Purdue University/CME Group Ag Economy Barometer dropped 16 points to a reading of 167 in November, down from its all-time high set just one month ago. 

The decrease in sentiment was led by farmers’ more pessimistic view towards the future of the agricultural economy with the Index of Future Expectations falling 30 points to a reading of 156 in November. 

At the same time the on-going rally in commodity prices and CFAP-2 payments continued to support producers’ view of current economic conditions as the Index of Current Conditions rose 9 points in November to 187, an all-time high for the Current Conditions Index. 

The Ag Economy Barometer is calculated each month from 400 U.S. agricultural producers’ responses to a telephone survey. 

Producers were more pessimistic about future economic conditions on their farms in November than they were just a month earlier, which is the opposite of what happened following the November 2016 election. 

That year producers became much more optimistic about the future following the election and, in turn, that optimism about the future helped drive the Ag Economy Barometer up sharply in late 2016 and early 2017. 

In the November survey, 77 percent of respondents said they expect more restrictive environmental regulations five years from now vs. 41 percent who felt that way in October. 

When asked about income tax rates, 66 percent of respondents in November said they expect higher rates for farms and ranches five years from now compared to just 35 percent who felt that way in October. 

Similarly, 66 percent of respondents in November also indicated that they expect estate tax rates for farms and ranches to rise compared to 40 percent who said they expected higher estate taxes for farms and ranches back in October. 

The percentage of producers who said they expect government support for the U.S. ethanol industry to decline nearly doubled from October to November with 33 percent of respondents in November expecting government support to decline over the next five years compared to just 17 percent in October. 

This was similar to the shift in attitudes regarding the farm income safety net as 35 percent of respondents in November said they expect to see a weaker farm safety net five years from now compared to 18 percent who felt that way in October.