Optimism jumps with Trump

SAN ANTONIO, Texas — American farmers are optimistic about the future despite their worsening financial shape.

The University of Purdue produces an Ag Economy Barometer that tracks farmer sentiment.

It is based on a monthly survey of 400 farmers across the United States with gross farm sales in excess of US$500,000.

The barometer hovered around 100 between its launch in October 2015 and October 2016.

It fell to a low of 85 in the spring of 2016 because of bleak spring crop budgets, falling prices and nervous lenders.

By July it had jumped to a high of 116 because of a price rally that drove corn up to $4.50 per bushel.

Then came fall and optimism of a short corn crop faded, prices tumbled and so did the index, down to 92.

Dave Widmar, senior research associate with the Center for Commercial Agriculture at Purdue University, asked growers attending the 2017 Commodity Classic to guess what has happened to the barometer since October.

Most of them felt it would have risen, and there was a collective gasp from the audience when Widmar showed what happened to the barometer over the next three months.

It did rise — a lot.

By January 2017 the barometer was at 153, a 66 percent improvement from October 2016.

“Something changed post-harvest,” he said.

Widmar had to wait a bit for the audience to catch on to what he was saying. It started with a few laughs and built into a full-room chuckle as people figured out the source of farmer optimism.

“There is definitely some correlation between the November election results and producer sentiment,” he said.

A similar thing happened in the United States as a whole. Consumer sentiment was at a 13-year high in December and January.

Fred Seamon, executive director of CME Group, said other factors were behind the surge in positive sentiment besides newly elected President Donald Trump.

Prices for the major commodities hit seasonal lows in late summer and early fall of 2016.

“From that point forward we have rallied somewhat in prices, not that prices are good by any means, but they’re much better than what they were six to nine months ago,” he said.

As well, export demand for corn, soybeans and wheat has been strong and ethanol production has hit a near record, so growers are moving a lot of their crops.

Widmar said a growing number of farmers feel their operations will be in better financial condition a year from now. The number was 39 percent in January, up from 13 percent a year ago.

However, he said that means 61 percent think they will be in the same or worse financial shape.

When growers were asked how their operations are doing today versus a year ago, 58 percent said they were in worse financial shape.

That is down from 74 percent in November 2016, but it is still more than half of growers saying they’re worse off.

“That really underpins the bleak and difficult conditions that producers face,” he said.

Jim Mintert, director of the centre where Widmar works, showed the total cost of production for a farm in Indiana on average soil over the last decade.

It went from $3 per bushel in 2007 to a high of $5 per bu. in the ethanol era of 2012-13. The cost in 2017 is estimated to be $4.40 per bu.

Fertilizer and cash land rent costs are down, but seed and pesticide costs are up.

The problem is that corn prices have been below the cost of production since 2014 and that is also expected to be the case this year.

“Our challenge as an industry is to find ways to become more efficient and reduce our production costs over these next several years,” he said.

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