Producersí Future Outlook Dims as Attention Shifts Toward 2017Tue, 01 Nov 2016 20:14:13 CDT
The Purdue/CME Group Ag Economy Barometer turned lower in October, dropping to an index reading of 92, the lowest reading since last March. Thatís also the lowest index since data collection began back in October of 2015. Producersí expectations of the long-term health of the ag economy dove in October, with the Index of Future Expectations dropping to 95 in October, down from 109 in September and the July peak of 121.
A key consideration regarding future prospects for the U.S agricultural economy is the direction crop prices will move during the upcoming year. To better measure producersí crop-price outlook, they were queried regarding their expectations for movement in July 2017 Chicago Board of Trade (CBOT) futures prices for corn and soybeans between October 2016 and summer 2017 (Figure 4). More specifically, producers were asked if they thought: 1) July corn futures prices would exceed $4.00 per bushel, 2) July corn futures prices would fall below $3.00 per bushel, 3) July soybean futures prices would exceed $10.00 per bushel, and 4) July soybean futures prices would fall below $8.00 per bushel.
One-third of producers surveyed said they expect July 2017 CBOT corn futures prices to exceed $4.00 per bushel between October 2016 and next summer and a similar share of respondents (30 percent) expect July 2017 soybean futures prices to exceed $10.00 per bushel. Crop budgets for both of these crops suggest that futures prices at these levels for the 2016 crop would allow many Midwestern cropping operations to approach breakeven, especially given that many farms are harvesting above-average yields this fall. Farmers with this price outlook are likely those with an optimistic perspective regarding future financial conditions in the agricultural sector.
In contrast to the optimism expressed by some survey respondents, a slightly smaller share of producers think a much more negative corn and soybean price scenario is likely. Twenty-seven percent of survey respondents expect corn prices to fall below $3.00 per bushel and 25 percent of respondents expect soybean prices to fall below $8.00 per bushel. Corn and soybean prices at these levels are below breakeven for the vast majority of U.S. farm operations and farmers with this price outlook are likely those with the most dire outlook regarding future financial conditions in agriculture.
Producers also plan to make management changes next year because of the economy. 46 percent of respondents plan to lower fertilizer rates and 35 percent plan to adjust trait packages in their seed varieties.
Click here to view the complete report released on November first by Purdue and the CME Group.
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