Producers show cautious optimism in survey

Farm Forum

Agricultural producers appear to have rediscovered some optimism after reporting pessimistic outlooks earlier this year, according to a confidence report released Monday.

DTN/The Progressive Farmer’s Agriculture and Agribusiness Confidence Index – in which a score of 100 is neutral – rebounded to 103.4 after dipping to a pessimistic 99.8 last September, the first time it had dropped below 100 since its inception in 2010.

DTN Markets Editor Katie Micik, director of the index, said a rebound of commodity prices in recent months likely contributed to the more optimistic outlook.

Cash grain prices paid to farmers by country elevators in the Lincoln area as of Jan. 5 ranged from $3.61 to $3.64 a bushel for corn, 5.79 to 5.85 for wheat, 9.72 to 9.75 for soybeans.

The DTN index is based on surveys of 500 crop and livestock producers and is done three times a year, the most recent one between Nov. 20 and Dec. 4.

It showed regional differences in producers’ confidence: Midwest producers remain pessimistic, but their confidence level improved from 92.0 in August to 97.7 in December; Southwest index numbers improved from 110.8 in August to 112.1 in December; Southeast producers’ confidence levels fell from 107.6 to 103.1 over the same period.

Livestock producers, who have seen strong profit margins the past year, seem to be lowering their expectations for the future. The index showed their satisfaction with current conditions is high, 132, but their expectations for the future sank to 89.4 in December from 95.5 in August. That could be due to fear that prices have peaked.

“You can’t live on record prices very long,” said Brad Lubben, a University of Nebraska-Lincoln Extension public policy specialist. “You will encourage alternatives or you will encourage expansion at a certain point.”

Pork prices already have moderated and market watchers expect an expansion of herds from both hog and cattle producers in the coming years.

On the crop side, farmers are relearning how to operate with tight margins and make tough production decisions after five or six years of strong profits, Lubben said.

“It was fairly easy to make those production decisions in previous years when everything looked profitable and the question was how much,” he said. “This might be the first year where producers have to squeeze hard and figure out what decisions fit.”

Machinery purchases have slowed, but they have not stopped altogether, which shows some cash and confidence remains in the agricultural industry, according to Lubben.

The situation is far from the crisis the farm economy saw in the 1980s, Creighton University economist Ernie Goss said. “Farmers entered this slowdown in much better balance sheets,” Goss said in an interview.

Creighton’s Mid-America Business Conditions Index for December, a leading economic indicator for a nine-state region stretching from North Dakota to Arkansas, showed indices pointing to positive economic gains over the next three to six months, thanks to a boost from low gas and energy prices.

The index showed Nebraska’s economy continued to grow for the 12th straight month.

“For 2014, Nebraska’s leading industry was food processing, while its lagging industry was machinery manufacturing,” Goss said in a news release. “Based on our survey results, I expect Nebraska to add jobs at a solid pace for the first half of the year with pullbacks in the export of agriculture commodities restraining growth to a still healthy rate.”