AmericanFarm.com

A picture of cautious optimism (Editorial)

(Sept. 22, 2015) With the road ahead appearing rocky, farmers are staying optimistic. But barely.
The most recent Agriculture Confidence Index by DTN/The Progressive Farmer doesn’t paint a great picture for American agriculture in the near future.
The confidence index, which surveyed 500 crop and livestock producers on Aug. 5-17, measures the sentiments of crop and livestock producers on their overall agriculture sector impressions. DTN/The Progressive Farmer conducts the ACI three times a year — before planting, prior to harvest and after harvest.
Along with their overall confidence, producers also gauge their attitudes toward the present situation and future expectations.
A value of 100 is considered neutral. Values above 100 indicate optimism, whereas values below signify pessimism.
Producers’ perceptions over their current situations have dropped steadily, if not dramatically, from 118.0 last August to 109.1 in March to 101.5 now, remaining just in the optimistic range but at the lowest level since the index started in 2010.
Since last year’s record harvest, farmers have watched commodity prices fall steadily, registering about half of what they were three years ago. USDA recently estimated 2015 net farm income at $58 billion, down 36 percent from last year.
That’s forced producers’ confidence for the ag industry to enter the pessimistic range for the first time last August at 99.8, followed by an all-time confidence index low of 98.8 in March. Producer confidence rose slightly to 99.4 in August.
While producers overall are pessimistic, crop and livestock producers have different perspectives. Crop producers’ confidence levels stand at 97.9, compared to 102.5 for livestock producers.
Given low commodity prices, crop producers are disappointed with their current economic situation but believe the issue will improve in a year. Conversely, livestock producers are considerably optimistic, at 122.2 on the index, about their current economics, but expect the next year will get worse, coming in at 89.3.
DTN/The Progressive Farmer also measures the confidence of agribusinesses, and that index has dropped significantly in the past year.
Agribusiness expectations for the upcoming year came in at a dreary 80.9, nearly equaling the all-time record low of 80.5 set during the 2012 drought year.
This marks a 17-point drop since March.
Agribusinesses cited ongoing market volatility and reduced input purchases by producers as contributing factors.
In fact, almost one-fourth of the agribusinesses surveyed expect their sales to be worse in the year ahead, which is up significantly from 10 percent in March.
“Producers’ sentiments on their current situation have eroded the past year,” said DTN Markets Editor Katie Micik, director of the confidence index. “Commodity prices have not rebounded while costs continue to rise, causing farm incomes to drop. Yet, producers think things can’t get any worse.”
Unfortunatley, they can get worse, but famers are finding renewed optimism taking the long view. Last August, the rating for producers’ expectations for the future stood at 87.8. A year later, producers rated their future expectations at 98.0, still in the pessimistic range but the highest rating in three years.
Seventy percent of the producers in the survey believe farm income will stay the same or improve the next 12 months.
That’s up from 58 percent in March and from 60 percent last August.
There, we see the resiliency of the American farmer, often tested but not broken.
No stranger to rough patches, farmers will manage their way through to stay in business as they have many times before.
They may be reluctant to admit it but they know it. And we’re all the better for it.