Good Prices Lifting US Farm Spirits

Strong commodity prices are apparently lifting farm spirits across much of the US.

The latest update of the Purdue/CME Group Ag Economy Barometer – which is based on a monthly survey of 400 farmers nationwide - shows an increasing number of American producers expect their farm’s financial position to improve versus a year earlier. In fact, the so-called Farm Financial Performance Index, a portion of the overall ag economy barometer, has seen a remarkable improvement, up 127% from last April to a record high of 125 points in March.

Producers’ perspective on their farms’ financial position also appears to be fueling some short-term optimism about farmland values and capital investments, the barometer said, with more farmers expecting strength in land values and viewing this as a good time for farm investments.

“Even with a rebound in crop production in 2021, it looks like carryover supplies of corn and soybeans will remain tight and that seems to be providing producers' confidence that crop prices will remain strong this year,” the barometer said. “Additionally, expectations for a smaller pork supply, combined with a rebound that appears to be on the horizon for the U.S. economy this summer, is providing some optimism in the livestock sector.”

But while they have become more optimistic about the future, it is notable American farmers are not more optimistic concerning trade with China.

The percentage of producers who expect the US trade dispute with China to ultimately be resolved in a way that’s beneficial to US agriculture peaked in early 2020 at 81%. That percentage has been declining since that time and fell again in March to just 31%, down 7 points from February. The decline in optimism about the outcome of the trade dispute mirrors producers’ concerns about China fulfilling its Phase One trade agreement with the US. Back in October, 59% of producers said they expected China to fulfill its Phase One obligations, but that percentage has been declining continuously since last fall. In March, only 35% of those surveyed said they expect China to fulfill the Phase One agreement.

Source: DePutter Publishing Ltd.

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