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PURDUE/CME INDEX: EXPECTATIONS FOR IMPROVED TRADE SENDS FARMER SENTIMENT SOARING
Source: Purdue University news release

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The Ag Economy Barometer rose to a reading of 167 in January, a 17-point jump from December when the index stood at 150. Virtually all of the rise in this month's barometer was attributable to a sharp rise in optimism about future conditions in agriculture. The Index of Future Expectations climbed 24 points to 179, while the Index of Current Conditions at 142 was essentially unchanged from the December reading of 141.

This month's Ag Economy Barometer survey, which is based on responses from a nationwide survey of 400 agricultural producers, was conducted from January 13-17, 2020. The sharp improvement in future expectations coincided with President Trump's signing of the Phase One Trade Agreement between the U.S. and China on January 15th. In the agreement, China agreed to increase purchases of U.S. manufacturing, energy, and agricultural goods and services by at least $200 billion over two years, but it did not include specific information regarding which U.S. goods and services would benefit from the purchases.

Figure 1. Purdue/CME Group Ag Economy Barometer, October 2015-January 2020.


Agricultural producers have become noticeably more optimistic about the future of agricultural trade over the last several months. As recently as October, just 55 percent of the farmers in our survey said they expect to see U.S. ag exports increase over the next 5 years.

Figure 2. Indices of Current Conditions and Future Expectations, October 2015-December 2019.


That changed in November and continued through the January survey as 70 to 71 percent of survey respondents said they expect to see ag exports rise in the upcoming years. At the same time, the percentage of producers with a pessimistic ag export outlook declined, as just 4 percent of respondents in January said they expect to see an export decline. That represents a shift from late summer when 10 to 12 percent of producers in our survey said they expect exports to decline over the next five years.

Part of the improvement in farmers' trade outlook can be traced to a shift in their expectations regarding the trade dispute with China. Although the Phase One Trade Agreement with China did not explicitly address the soybean trade dispute, the percentage of farmers who expect the soybean trade dispute to be settled soon rose to 69 percent in January from 54 percent in December.

That percentage has been rising steadily since July when just 22 percent of producers said they expected a quick resolution to the soybean trade dispute. At the same time, 80 percent of farmers in January said they expect a favorable outcome to the trade dispute with China compared to 72 percent who felt that way in December.


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