Farmers expect bleak 2016 ag economy
OMAHA (DTN) – Concerns over their current financial situation and expectations for the future have pushed crop and livestock producers’ confidence to an all-time low in the history of DTN’s farmer Agriculture Confidence Index.
According to the latest survey, producers’ overall confidence fell to 92.7 from 99.4 in August and 103.4 a year ago. (100 percent is considered neutral. Values above 100 indicate optimism, whereas values below signify pessimism.)
Concerns over their current situation dropped significantly over the past year from 113.3 in December 2014 to 101.5 in August then to 92.2 following this year’s harvest.
Farmers’ expectations about the future decreased from 98.0 in August to now 93.1.
“This marks the first time in the history of the Ag Confidence Index that each of these measurements has been in the pessimistic range at the same time, and it’s an indication that farmers are facing some hard economic realities,” said DTN Markets Editor Katie Micik, director of the confidence index.
The confidence index, which surveyed 500 crop and livestock producers from Nov. 2 to Nov. 25, measures the sentiments of crop and livestock producers on their overall agriculture sector impressions.
Since 2010, DTN has conducted the ACI three times a year – before planting, before harvest and after harvest.
Producers also rate current and long-term input prices and net farm income to gauge their attitudes toward the present situation and future expectations.
Falling crop prices and uncertainty over input costs have farmers concerned about their incomes, noted Micik.
In the recent survey, 53 percent of farmers describe input prices as bad, which is up from 48 percent in August, marking the fifth consecutive survey in which the number of farmers rating input prices as bad has increased.
Eighty-three percent of farmers surveyed believe input prices will stay the same or get worse over the next 12 months.
According to the ACI, 44 percent rated farm income as bad and 42 percent said income was normal.
“For the first time in the index’s history, more producers consider their current farm income as bad, rather than as normal,” said Micik. “Looking forward 12 months, 84 percent believe farm income will stay the same or get even worse, with only 16 percent saying it will improve.”
For just the second time in the index’s history, both crop and livestock producers have a pessimistic confidence score, with crop producers at 91.0 and livestock producers at 96.4.
Not surprisingly, market price uncertainty has contributed significantly to this pessimism.
“Ag economists believe this period of low crop prices could last for two to three years, which has crop producers gloomy about the future,” said Micik. “As for livestock producers, recent volatility in the cattle and hog futures markets has them concerned.”
Crop producers’ attitudes remain pessimistic on their current situation and future expectations. The index rating on the current situation fell from 92.0 in August to an all-time index low of 86.5, and future expectations also dropped into the pessimistic range from 101.8 before harvest to now 94.1.
Livestock producers’ future expectations came in at 90.6, up slightly from 89.3 in August. Their view on the current situation remains in the optimistic range at 105.2, but Micik indicated that this is the lowest number for the category in the index’s history.
Low crop prices also play a role in regional differences in the recent ACI survey. With the combination of low prices and the high concentration of corn and soybean acreage in the Midwest, producers in that region are the most pessimistic about their overall confidence (85.3), current situation (79.8) and future expectations (89.0).
The overall index scores were slightly higher in the southeast (96.8) and southwest (98.0). Expectations for the future remain solidly pessimistic for producers in the southeast (87.2) and southwest (95.3).
Unlike Midwest producers, southeast and southwest producers still have optimistic ratings for their current situations at 111.1 and 102.1, respectively. Micik believes this is due to greater diversity in farm type and more regional cash prices.
Agribusiness index scores remain low, but not as historically low as with producers.
According to the DTN’s index, which measured the sentiments of 100 agribusinesses from Nov. 12 to Nov. 19, agribusiness confidence continues in the pessimistic range at 98.3, down from 105.5 a year ago, but up from 92.0 before this year’s harvest.
Agribusinesses surveyed include agronomists, bankers, ag input retailers and suppliers, equipment dealers and crop insurance agents.
While agribusinesses are positive about their present situation, their score fell for the fifth consecutive survey starting with a score of 121.6 in March 2014 to now 106.4, reflecting the general downturn in farm income prospects.
“Expectations for the next year rebounded from a near-record low in the pre-harvest survey as producers have begun purchasing inputs for next year.
Yet agribusinesses still remain in the pessimistic range on their future, a sentiment that has not changed the past two years,” said Micik.
Ninety-two percent of agribusinesses described current sales as good or normal, with 87 percent saying current profitability was good or normal.
A year ago, 95 percent of agribusinesses said sales were good or normal, while nearly as many (93 percent) rated profitability as good or normal.
Looking ahead, 56 percent expect sales to remain the same, while 27 percent say sales will get better and 17 percent expect them to get worse.
“There is more hope about the business environment 12 months from now than there was in the pre-harvest survey,” said Micik. “Eighty-three percent of agribusinesses expect profits to remain the same or get better compared to 77 percent in August.”
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