Future Expectations Turn Lower

Collette Schultz

The Purdue/CME Group Ag Economy Barometer September reading of 132 was unchanged compared to August. The monthly measure of agricultural producer sentiment – which is based on a monthly survey of 400 U.S. producers of corn, soybeans, wheat, cotton, beef cattle, dairy cattle, and hogs – has ranged between 130 and 139 over the last six months and remains well below its peak level of 153 established in January 2017.

Figure 1. The Purdue/CME Group Ag Economy Barometer, October 2015 to September 2017.

Although the Ag Economy Barometer was unchanged in September, the barometer’s two sub-indices, the Index of Current Conditions and Index of Future Expectations, did shift in opposite directions. The Index of Future Conditions turned down in September while the Index of Current Conditions improved, reaching its second-highest level since data collection began in October 2015. Although the decline in the Future Expectations index was modest, it could be an indication that some of the optimism that surfaced among producers in late 2016 and early 2017 is eroding.

Waning Optimism about the U.S. Economy

One of the drivers behind the jump in producer sentiment following the 2016 election was a sharp uptick in expectations about the U.S. economy (Figure 3). In October 2016, a larger share of producers (23 percent) expected the U.S. economy to contract over the upcoming 12 months than expected the economy to expand (13 percent). By December, however, this changed markedly as half of the survey respondents reported that they expected the U.S. economy to expand during the upcoming year. This improved again in March with nearly 60 percent expecting economic expansion to take place. However, the last two times this question was posed, in June and again in September, respondents were noticeably less optimistic about the U.S. economy. On the September survey, just 40 percent of the respondents said the U.S. economy was likely to expand, a decline of nearly one-third since March. Although most of the decline was attributable to producers’ responses shifting from “expand” to “remain about the same,” the share of producers expecting the U.S economy to contract increased to 13 percent in September compared to 9 percent in both March and June.

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