Agriculture Confidence Index

A long, drawn out crop year and ongoing trade battles didn’t dampen farmers moods, as they ended 2019 with new optimism and were solid in their support for the Trump administration.

The DTN/The Progressive Farmer Agriculture Confidence Index has risen to 164.1 in December 2019, significantly higher than the Index of 110.2 in March and the December 2018 level of 109.2.

Farmers were surveyed in mid-to-late December. About 75% of farmers said that if the 2020 presidential election was held at that time they would vote to re-elect the current administration.

About a quarter said they would likely not vote for the current administration. The question was asked without respondents knowing who an alternative candidate would be.

Both farmer confidence and their support of the president is noteworthy, given events going on at that time. Grain farmers had just finished a long, wet harvest, and some farmers in the upper Midwest still had fields to harvest. The Trump administration in December promised to have a trade deal signed with China within a month, although similar previous promises had not come to pass. That phase-one trade deal was signed Jan. 15, and included the promise that China will double its purchases of U.S. agricultural products.

Mid-December also saw Congress being pressured to multi-task, to ratify the United States-Mexico-Canada Agreement (USMCA) while it simultaneously prepared to impeach the creator of that trade pact. USMCA, too, now appears ready for approval by President Donald Trump. Trump told an audience at the annual American Farm Bureau Federation convention Jan. 19 that his team was preparing the trade documents. “I will sign it very soon,” Trump said.

SURVEY METHODOLOGY

The DTN/The Progressive Farmer Agriculture Confidence Index is conducted three times a year: early spring before planting, late summer just prior to harvest, and just before the end of the year, during tax preparation time. The telephone survey is conducted with at least 500 farmers who identify as being actively engaged in their farm operations.

Farmers responding to the telephone survey answer a series of financial and income questions that compare the present to how they expect conditions to be in the coming year. A score is given to rate their “present situation” and to their “future expectations.” Those numbers are combined to create the overall Agriculture Confidence Index.

Numbers above the baseline of 100 indicate optimism — the higher the number, the higher the optimism. Scores below 100 are considered pessimistic.

SLIGHTLY OPTIMISTIC AT PRESENT

For December 2019, farmers gave their present condition a slightly optimistic rating of 115.5, the first time this piece of the index has been above 100 since Dec. 2017. The present-time rating was a pessimistic 63.0 in March; it was an even lower 56.5 a year ago.

“This level of recovery also has not seen since the summer of 2018,” said Robert Hill, economist and original designer of the Agriculture Confidence Index. “While this is a very positive development, the present situation is still only about half the level achieved in the go-go days of 2012.”

The steep rise in the overall index is also driven by farmers’ record optimism for the future. The rating for “future expectations” is 191.0, above the 136.1 of March 2019 and the 138.0 of December 2018. The previous record for future expectations was 163.6 in March 2017.

“The expectations for the future have never been greater over the entire decade the ACI has been in existence,” Hill said. “This is true for every subgroup investigated, including regions, type of farm, or income class.”

Midwestern farmers were the least positive about current conditions, dipping into pessimistic territory at 97.5, but still above previous 2019 levels. Midwest future expectations rating was a record 196.1, creating an overall ACI of 155.5.

Southeastern farmers were most pleased with current conditions, with a 162.9 rating and a slightly lower 153.1 for expectations of the future. Overall, the ACI for that region was 155.9.

“Bottom line is the farmers are feeling pretty good about their current situation and have very high hopes for the future. Their views on income prospects have improved, both for farm income and overall household income. On the input side, their attitudes also improved on current levels of input prices and on future input prices.”

AGRIBUSINESS RESPONSES

In conversations with ag input companies, Hill noted that purchases for the 2020 season were behind normal levels at year’s end. “A ‘delay hangover’ from the 2019, added onto by a ‘prevent hangover,'” had farmers cautious about placing orders. “In many areas, fall fieldwork was not completed and has dragged over to hopes for open weather in late-winter or early spring in order to get caught up. And there are still some unharvested crops out there,” he said. With the farmers’ improved optimism, both on income and costs, “we should see these input orders placed quickly now.”

In addition to the survey of farmers, DTN/The Progressive Farmer also conducts a similar query of at least 100 ag retailers for the DTN/The Progressive Farmer Agribusiness Index. Scores around that index are flat to slightly lower. The DTN/The Progressive Farmer Agribusiness Index is at 100.5. It was 103.4 in March, 95.6 a year ago.

“Agribusinesses serving the farmers don’t seem to share the optimism felt by their customers, and have turned slightly more sour than a year ago,” Hill noted.

Greg D. Horstmeier can be reached at greg.horstmeier@dtn.com

Follow him on Twitter @greghorstmeier

Source: Greg Horstmeier, DTN