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Are Ag Producers Financially Stronger?
U.S. ag producers feel financially stronger compared to 2016
Shared from: World Grain written: by Susan Reidy
U.S. agricultural producers’ feel their operations’ financial positions are improved compared to a year ago, which has helped the Ag Economy Barometer hold steady for the past three months and remain well above levels recorded prior to November 2016.
The results come from Purdue University/CME Group’s June survey of 400 U.S. agricultural producers. The June reading for the Ag Economy Barometer, a producer-based sentiment index, was 131, virtually unchanged from a month earlier.
The shift in producers’ perspectives regarding their financial positions is part of a long-term trend, researchers said. A year ago, only 3% of survey respondents felt their operations were financially better off than a year earlier. That increased to 10% in the fall, declined in early winter, and rebounded to its current reading of 13%, the highest since the survey began in October 2015.
The shift is likely reflective of several factors, researchers said, including increased revenues due to record, or near record, crop yields in 2016; moderated production costs; and a downward adjustment in farmland rental rates.
The barometer survey also asks producers about the key drivers affecting their farms and the broad farm economy. On the June survey, producers were asked to compare current expectations about their farm financial performance in 2017 to their initial budgets or plans. Most producers (60%) indicated that current expectations are “about the same” as their initial expectations. However, for farm operations whose expectations changed, a turn toward “worse than” planned (28%) was more common than “better than” budgeted (12%).
This could be because of the difficulties some farms have experienced this spring with respect to planting and poor growing conditions, the researchers said. One of the challenges producers faced this spring has been an oscillation from cool/wet periods to hot/dry spells.
Compared to previous surveys there was an uptick in the share of respondents rating it likely that extreme weather events would have widespread, adverse impacts on crop yields over the next 12 months.
There is still some expectation that policy changes will lead to an improved business climate as evidenced by the nearly one-fifth of survey respondents that expect taxes to decline over both the next 12 months and the next five years, researchers said.