Ag Economy Barometer - December 2016

KANSAS CITY — Agricultural producers’ sentiment advanced for the second consecutive month in December and was the highest since data collection began in October 2015, according to the Purdue University/CME Group Ag Economy Barometer.

The barometer reading of 132 in December (base period of October 2015 to March 2016 equals 100) was up from 116 in November, 92 in October and 107, or 23%, in December 2015. The barometer is based on a monthly survey of 400 agricultural producers and is considered a measure of the health of the U.S. agricultural economy.

“Optimism about both current and future economic conditions helped drive the barometer higher during December,” Purdue University agricultural economists said concerning the latest results. “Although both of the Ag Economy Barometer’s sub-components, the Index of Current Conditions and Index of Future Expectations, increased during December, the biggest improvement was in producers’ expectations about future economic conditions.”

Ag Economy Barometer - December 2016

The Index of Current Conditions was 102, up 15 points from November, while the Index of Future Expectations was 146, up 16 points and the highest since the survey began.

“Interestingly, the improvement in producer sentiment over the last two months does not appear to be motivated primarily by changes in corn and soybean prices,” the economists said, noting that corn futures were slightly lower and soybean futures were only slightly higher during the data collection period.

The economists noted that the optimism expressed by agricultural producers extended to the general economy with 71% of the respondents in December expecting “widespread good times” for the U.S. economy over the next five years, up from 35% with the same expectation in October.

Ag Economy Barometer - December 2016

“The contrast in sentiment from the October survey, three weeks prior to the U.S. elections, and the December survey, five weeks following the elections, is remarkable,” the economists said. “The improvement in optimism regarding the U.S. economy among agricultural producers appears to parallel that of U.S. consumers. For instance, the University of Michigan’s Index of Consumer Sentiment rose from a reading of 87 in October to a 12-year high of 98 in December.

“Despite the improvement in sentiment among producers revealed by the December survey, it’s important to be cognizant of the fact that nearly two-thirds of the producers surveyed indicated that the financial conditions of their farming operations were worse in December 2016 than a year earlier.”

The January barometer will be released in early February.