Every month the world’s markets watch for the ISM Manufacturing Index to be released.
Why isn’t there a similar gauge for the U.S. farming and agriculture sector?
That’s a question Purdue University and the CME Group tackled and, they hope, eliminated with the introduction of the Purdue/CME Group Ag Economy Barometer.
Now investors, lenders, traders and farmers have a broadly representative snapshot of how U.S. farmers are feeling, which will be released on the first Tuesday of every month.
“When we looked at the agricultural economy, we thought there was an information void,” said James Mintert, the director of Purdue’s Center for Commercial Agriculture.
Sentiment indicators are generally built around surveys sent to a large number of significant members of an industry.
The Institute of Supply Management’s ISM Manufacturing Index is based on a survey of over 300 manufacturers. It measures their feelings about the economy, their own businesses, and the possible decisions they might make in coming months.
The Ag Economy Barometer is trying to offer the same sort of portrait of farmer attitudes.
The basic barometer provides a sentiment number off a baseline of 100 from October 2015 to March 2016.
Anything above 100 reveals farmers feeling more optimistic than during that period, and anything below, shows a more pessimistic outlook.
The survey uses 400 producers from across the U.S. involved in different sectors of agricultural production, with the largest component being corn and soybean producers, at more than 50 percent of the sample.
Beyond the barometer’s sentiment measure, the surveys provide the opportunity to ask additional questions and assess other aspects of farmer outlook.
Mintert said a range of other issues will occasionally be raised as the barometer operates, including farmland and input prices.
The most recent results, released in April, show farmer sentiment fell from October to March, but then rebounded. That reflects the decline then rally in corn futures, showing how fundamentally farmer outlooks are defined by prices.
Four times a year the barometer team will also survey a group of 100 “agriculture and agribusiness thought leaders” and issue more in-depth reports.
Farmers are famous for attempting to mislead government surveys that look at crop production.
Many believed that underreporting the size or quality of crops helps create bullish news in the marketplace, which will raise prices.
That has led to a fudge factor being included in some reports of agencies like those of the U.S. Department of Agriculture, which adjusts some reported numbers to reflect the underreporting phenomenon.
Mintert said he doubts that will be a factor in the Ag Economy Barometer, because it is not asking for production numbers.
The perspective it provides should give the markets a better sense of how farmers are feeling, regardless of underlying conditions, and that’s something that has never been available.
“We didn’t see anything like that in the ag sector,” said Mintert.