Agriculture producer optimism about prices and the future has returned after a downturn prior to this year's record corn and soybean harvests, according to the latest DTN/The Progressive Farmer Agriculture and Agribusiness Confidence Index (ACI).
Producers' overall confidence climbed to 103.4 from 99.8 last September, the first time the overall confidence value had fallen below 100 since DTN/The Progressive Farmer began the ACI survey in April 2010. The value of 100 is considered neutral. Values above 100 indicate optimism, whereas values below signify pessimism.
The confidence index, which surveyed 500 crop and livestock producers Nov. 20-Dec. 4, 2014, measures the sentiments of crop and livestock producers on their overall agriculture sector impressions. The ACI is conducted three times each year – before planting, prior to harvest and after harvest. Producers are also asked to rate current and long-term input prices and net farm income to gauge their attitudes toward the present situation and future expectations.
Crop and livestock producers remain positive about their present conditions. However, their optimism has weakened during the past two years from 137.2 in December 2012 to 113.3 this past December. Conversely, producers' expectations for the future climbed from 87.8 last August to 97.0 in December, marking the second highest rating of the past four years.
"Overall, the producer pendulum swung back into optimistic territory from a negative reading prior to harvest, said DTN Markets Editor Katie Micik, director of the confidence index. "This upward shift actually came from improving expectations for the year ahead, which outweigh a decline in producers' ratings of their present situation.
There were noticeable regional differences in producers' confidence levels. Although the confidence levels of Midwest producers remain pessimistic, it improved from 92.0 in August to 97.7 in December. The confidence level with producers in the Southwest improved from 110.8 in August to 112.1 in December. However, the confidence level of producers in the Southeast fell from 107.6 to 103.1 over the same period.
Crop producers' confidence rose to 101.9 from an all-time low of 96.3 in September, but it is still lower than last March (102.7) and December 2013 (104.3).
While many crop producers have begun to lock in their inputs for 2015, 39 percent of survey respondents believe current crop input prices are bad compared with 39 percent as normal and 22 percent as good. Nearly 70 percent of producers expect crop input prices will get better (20 percent) or stay the same (49 percent) for the next 12 months.
"Crop producer attitudes on the outlook for better crop input prices a year from now might be due to prospects on lower fertilizer or seed costs, said Micik, "but it could also reflect the lag time it takes for cash rents to react to commodity prices.
Livestock producer confidence remains positive (106.4), but it has weakened since March (116.4) and September (108.7). Livestock producers are highly favorable of current conditions. They rated their present situation as 132.0, up from 128.5 in August. However, their expectations for the future sank over the same period from 95.5 to 89.4.
"This possibly reflects the expansion in hog production and the corresponding decline in prices. It could also be an indicator of a larger calf crop headed for feeding, said Micik.
As for income, 71 percent of all producers believe their current net farm income will get better or stay the same, which is down from 81 percent in December 2013. Sixty-six percent believe their net farm income 12 months from now will be better or the same, up from 62 percent a year ago.
Agribusiness Confidence Index
While crop and livestock producers' attitudes improved, the confidence levels of agribusinesses took a small step back yet still remained positive. According to the DTN/The Progressive Farmer Agribusiness Confidence Index, which measured the sentiments of 100 agribusinesses Nov. 25 to Dec. 6, 2014, agribusiness confidence has fallen in the past three surveys from 107.3 last March to 106.1 in September to now 105.5 in December.
Agribusiness perceptions of their current situation remains optimistic but fluctuated in 2014, dropping from 121.6 in March to 96.7 in September and back up to 114.7 in December. Agribusiness expectations for the next 12 months have risen to 99.2, the highest level since 100.6 was recorded in August 2013.
Sixty-three percent of agribusinesses surveyed felt good about current sales, which represents a 7 percent drop since August but a 5.6 percent increase over December 2013. Just 5 percent of agribusiness said sales were poor.
"This drop indicates that while farmers are trying to reduce their input costs, they have decided not to skip many of the major inputs, explained Micik. "Looking ahead to next year, 60 percent of agribusinesses think sales will stay the same, while 26 percent believe sales will improve and 14 percent see sales getting worse.
As for current agribusiness profitability, Micik said 57 percent view it as normal, 36 percent good, and just 7 percent as bad. However, 15 percent of agribusinesses believe profitability will get worse the next 12 months, compared with 25 percent who say it will be better and 60 percent who say it will stay the same.