DTN: Farmers see a brighter 2017 lies ahead
OMAHA (DTN) – Farmers have put tremendous hope in the new presidential administration to make their lives better, despite expectations of continued low commodity prices, relatively high production costs and the threat of trade wars with key commodity importers.
This assessment was revealed Tuesday morning during the latest DTN/The Progressive Farmer Ag Confidence Index report.
The overall producer confidence index for December returned to neutral territory, rising to 98 compared to a value of 72 in the August survey.
An index value of 100 is neutral. Values above 100 indicate optimism, while values below signify pessimism.
“But the real story in the results from our latest survey is not in the overall index, it’s in the numbers behind that index,” said DTN Editor-In-Chief Greg Horstmeier. “Those numbers are unprecedented in the history of the Index.”
The attitudes of farmers surveyed in late November and early December were at historic lows – survey results put farmers’ rating of their present situation at a record 44.2.
That’s a significant drop from the August present condition score, which was the then-record low of 56.
In December 2015, farmers put their present condition at 81.7.
When asked about their confidence for the coming year, farmers’ answers revealed a huge jump in optimism, with a future expectations score of 126.6.
That’s the highest future expectations score in the history of the index.
“That swing, from record pessimism, and significantly more pessimistic than any other time in our index history, to a record level of optimism, simply defies logic,” Horstmeier said. “While most farmers have adjusted to lower commodity prices and are working on strategies to see them through tougher times, there is nothing on the horizon, not world grain supplies, not weather, not signs of new commodity demand, that would justify such optimism.
“To the contrary, from the standpoint of global grains and livestock price expectations, prices look flat at best for 2017.
“The only thing we can put our finger on is the presidential election. Farmers and rural America played a large role in Donald Trump’s victory, and farmers must feel he’s going to make the world right for them.”
The confidence index, which surveyed 500 crop and livestock producers between Nov. 28 and Dec. 1, measures their sentiments about the overall agriculture sector. Producers also rate current and long-term input prices and net farm income to gauge their attitudes toward the present situation and future expectations.
Since 2010, DTN conducts the ACI three times a year – before planting, before harvest and just before the end of the calendar year.
“The timing of the latest survey, right after the election and during the run up of the Dow Industrial Averages and other markets, had to play into the ratings,” Horstmeier said.
The trend of current pessimism and future optimism held true across geographical regions. Midwest farmers pushed the pessimism of those trends, with those farmers creating 40.5 present situation and 118.2 future expectation scores.
The Southeast was slightly more in the middle, and the Southwest had the highest level of optimism all around, with a 46.7 current condition and a 132.0 score for future expectations.
“Talking to farm leaders, the consistent point of optimism we heard was the promise by President-elect Trump to roll back a number of regulatory rules, including the Clean Water Act policy known as the Waters of the United States rule.
When we pushed Trump supporters on issues such as trade with Mexico, China and Japan, on the Refined Fuels Standard and the increasing value of U.S. dollar, which could hurt exports, they cautioned us to take a wait-and-see attitude on the president-elect.
“So you can begin to deduce from those comments that farmers who supported him are more concerned about existing regulatory issues such as WOTUS and the Endangered Species Act than they are about the potential for a trade war with key export markets like China,” Horstmeier said.
The only variance from the trend in producer ratings was across income levels. Farmers in the $100,000-$249,999 and $250,000-$499,999 income levels had future expectation ratings of 112.6 and 129.9, respectively.
Farmers with incomes of $1 million or more were a decidedly more pessimistic, giving future expectations a 79.
“Are higher income farmers less concerned about those regulatory issues, and more worried about commodity prices if we get into trade wars?” Horstmeier asked. “Or are those farmers also carrying relatively higher debt loads, so are changes like the Federal Reserve beginning to increase interest rates tempering their enthusiasm?
“It could be a combination of many things, but there’s a distinct difference in attitudes there.”
Other key ACI findings include:
A). Crop farmers were on the extremes of the December trends, with an overall rating of 97.1, based on a present condition score of 38.1 and a future expectation score of 130.9. Livestock producers’ levels were 97.5 overall, 60.0 for present situation and 115.7 for future expectations.
B). Slightly more than half (51 percent) of respondents expect farm income to be worse in the coming year, with 23.4 percent expecting better incomes, 25.6 expecting incomes to be the same as in 2016.
C). Expectations of all household income were similar: 51.8 expecting worse, 19.8 better and 28.4 the same as the previous year.
D). Input price expectations also were mostly pessimistic, with 51.2 percent expecting worse, 25 percent better and 23.8 percent the same.
Agribusiness confidence remains more pessimistic, and more in line with higher income farmers.
According to DTN Agribusiness Confidence Index report Tuesday, the sentiments of 100 agribusinesses Nov. 28 through Dec. 2. indicate farmers remain pessimistic at 88.4, down slightly from 90.6 in August, and below the 97.6 level in December 2015.
Agribusiness owners gave their current condition a rating of 89.4, down significantly from 105 in August and 108.7 in December 2015.
Future expectations for business success returned toward neutral territory, at 87.5, up from 79.7 August and near the year-end 2015 level of 89.4.
For more on the DTN ag confidence index visit DTNPF.com.
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