WEST LAFAYETTE, Ind. and
CHICAGO, June 7, 2016 /PRNewswire/ -- After a surge
in economic sentiment in April, agricultural producers said they
were slightly less optimistic in May, according to the latest
survey results from the Purdue/CME Group Ag Economy Barometer.
At a value of 97, the May Producer Sentiment Index was nine
points lower than in April, bringing it back in line with January
(98) and February (96). The index is based on a monthly survey of
400 agricultural producers.
Survey responses showed that the shift came from producer
feelings about current conditions rather than future expectations.
The Index of Current Conditions fell from 107 in April to 83 in
May, while the Index of Future Expectations fell just one point,
from 105 to 104.
Increased pessimism is likely due in part to falling livestock
prices, according to Jim Mintert, director of Purdue's Center for Commercial Agriculture,
professor of agricultural economics and principal investigator for
the barometer.
"Some of the decline in producer sentiment in May can likely be
attributed to changing perceptions about the livestock sector," he
said. "In May, just 36 percent of producers surveyed expected
widespread good times for livestock producers over the next five
years, which is a substantial drop from the 46 percent in April who
expected good times for livestock production."
One explanation for the drop is price declines in feeder and
live cattle. June live-cattle futures traded above $130 per hundredweight as recently as March. By
mid-April, those prices fell to $122,
and in early May they hit $115.
Feeder cattle futures followed suit, which Mintert said
diminished profit prospects for both cattle feeders and cow-calf
producers.
In contrast, crop sector sentiment exhibited a modest decline
from April to May.
"In short, the sentiment regarding the future for livestock
producers, which had been strong, showed signs of eroding relative
to expectations about the future for crop producers," Mintert
said.
In the May survey, producers also were asked about their
expectations for farmland values. This same question was also part
of the surveys in November, February and March, which gave
researchers a look at expectations over time.
The percentage of producers who expect farmland prices to
increase in the next year has been small but fairly stable since
November, consistently landing in a range from 13 percent to 15
percent.
The percentage of producers expecting farmland prices to fall in
the next year has fluctuated more. In November and March, 46
percent of producers surveyed expected farmland values to fall.
Respondents were less pessimistic in May, when just 33 percent said
they expected a decline.
Grain prices play a role, and overall, producers still see
farmland as a good investment, said Purdue research associate David Widmar.
"The reduction in pessimism regarding near-term farmland prices
is likely driven by the improvement in crop prices the last couple
of months," he said. "A majority of producers also still see
farmland as a favorable long-term investment."
When asked to evaluate farmland as an investment, 52 percent of
producers surveyed rated it positively and about 25 percent gave it
a neutral rating. Only 23 percent said they thought farmland was a
poor investment.
Finally, producers were asked about farmer profitability over
the next year. Only 10 percent reported that they expect
profitability to improve.
To read the full May report, access additional resources,
including webinar archives and schedules, and sign up to receive
monthly barometer email updates, visit
http://purdue.edu/agbarometer.
About the Purdue University
Center for Commercial Agriculture
The Center for Commercial
Agriculture was founded in 2011 to provide professional development
and educational programs for farmers. Housed within Purdue University's Department of Agricultural
Economics, the center's faculty and staff develop and execute
research and educational programs that address the different needs
of managing in today's business environment.
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