COVID-19 continues to impact farmer sentiment; economic assistance bill necessary
Farmer sentiment improved slightly in May after falling sharply in both March and April, according to the Purdue University/CME Group Ag Economy Barometer. The index was up 7 points from April to a reading of 103, but it remained nearly 40 percent below its all-time high of 168 set in February 2020. The Ag Economy Barometer is based on responses from 400 U.S. agricultural producers and this month’s survey was conducted between May 18-22. This month’s survey was conducted the same week that USDA announced the details of the Coronavirus Food Assistance Program (CFAP) so awareness of that program’s details could be one of the key reasons for this month’s barometer improvement.
The Index of Current Conditions improved in May, up 11 points from April to a reading of 83, as did the Index of Future Expectations, up 4 points to a reading of 112. In May, farmers were also somewhat more inclined to think now is a good time to make large investments in their farming operations. The Farm Capital Investment Index rose to a reading of 50 compared to just 38 a month earlier. While all three of these indices improved in May, each was still down more than 30 percent compared to February 2020, before coronavirus impacted markets.
In the May survey, more than 70 percent of respondents indicated they were “very worried” (34 percent) or “fairly worried” (37 percent) about the impact of coronavirus on their farm’s profitability, up from 67 percent in April. Their two biggest concerns were market access (42 percent) and financial (39 percent), with health and safety (11 percent) coming in third. Providing further evidence of their financial concerns, two-thirds of farmers surveyed indicated they think it will be necessary for Congress to pass another bill to provide more economic assistance to U.S. farmers.
When asked about expectations for their financial position over the next 12 months, over 60 percent said they expect farmers’ equity positions to decline over the next year, up sharply compared to 28 percent of farmers who felt that way in February 2020. Meanwhile, over 25 percent of farmers surveyed who rent farmland said they expect to ask their landlords to lower their cash rental payments in 2021 as a result of COVID-19, suggesting there will be downward pressure on cash rental rates next year.
The Ag Economy Barometer and two of its components – the Index of Current Conditions and the Index of Future Expectations – are reported on the Bloomberg Terminal under the following ticker symbols: AGECBARO, AGECCURC and AGECFTEX.