Ag Confidence Index Results

Crop, Livestock Farmers Share Downbeat Outlook

By Katie Micik
DTN Markets Editor
March 23, 2015

OMAHA (DTN) -- Crop farmers in the Midwest are no longer alone in their pessimism about the agriculture economy. Livestock producers and farmers in the south aren't feeling good about their prospects either, according to the latest results of the DTN/The Progressive Farmer Agriculture Confidence Index.

At 98.8, the pre-planting Agriculture Confidence Index is the most pessimistic since DTN began conducting the survey in April 2010, but it's still fairly close to a neutral reading.

An index value of 100 is considered neutral while higher values indicate optimism and lower values reflect pessimism. DTN surveyed 500 farmers and ranchers across the country between February 18 and March 2. DTN conducts the survey before planting, before harvest and after harvest each year to gauge farmers' attitudes at key times of the crop cycle.

"The current situation is much worse than it was a year ago, which should be no surprise given everything that's developed in the past 12 months on commodity prices and farm income reports," said Robert Hill, owner of Caledonia Solutions and the economist who designed the index. "This is the new economic reality that has swept through the industry. All the major sectors and regions of ag are reporting their current situation is worse than a year ago."

The survey asks farmers about current conditions and expectations about future conditions. Sentiment about current conditions has declined steadily since last spring, reaching its lowest ever in the latest survey. Expectations for the future are about as dismal as they were going into last year's planting season.

DTN also surveys 100 local agribusinesses from February 19 to March 5 about their feelings towards the current business environment. The DTN/The Progressive Farmer Agribusiness Confidence Index came in at 104.7, continuing a gradual decline in overall sentiment that began last spring.

"Local agribusinesses have had to face the wrath of farmers looking to cut costs and preserve the wealth and equity built up over the past 10 years of a strong farm economy," Hill said. "Current supplier sales are off substantially from 12 months ago as farmers have either postponed purchases, eliminated purchases or forced margin-cutting deals onto their suppliers. Local agribusinesses see this as the new norm in terms of selling things to farmers and ranchers."

More than 42% of the farmers DTN surveyed classified current input prices as bad, a large contributing factor to the pessimistic outlook.

"It definitely makes it more difficult for profitability. With the cost of commodities going down, it's tightened the profit range," said Mike Keys, a crop farmer from Wayne, Ohio. "Inputs went up during this last run of high prices, and now they've moderated a little, but not a lot."

He's probably gotten the most relief at the gas pump. Keys recently filled up his semi-truck, and it cost about two-thirds of what it used to cost.

Hill said the input supply industry is feeling growers' pain. Manufacturers have been cutting production and staff, producing "rather chilling financial reports, especially in farm equipment. On the seed side, growers on average have managed to cut their seed bills by moving away from higher-end, multi-stack hybrids toward seeds that are sacrificing one or two of the stacked traits. Seed companies enjoy higher margins on those multi-stacked hybrids, so this is cutting into seed industry profitability."

Keys told DTN he thinks input prices will improve in the year ahead, particularly chemical costs. Twenty-three percent of the farmers who responded to DTN's survey agree input prices will be better next year, a record high percentage that indicates many farmers are hoping input suppliers will cut prices next year.

Forty percent of survey respondents rank current farm income as normal, while 31% consider it bad and 28% consider it good. Keys said income at this time is probably normal. "We got kind of spoiled by that a little bit," he said about high commodity prices. "It was easy to get used to that [higher commodity prices], but we knew reality would step back in, and we would go back to more normal profit level."
The percentage of farmers who consider current income as normal has been steadily declining since August 2013. At the same time, the percentage of those who consider incomes as bad has been rising at a much quicker place.
Farmers' assessment of income one year down the road is bleak: 42% said income will be worse 12 months from now, compared to 41% who think it will stay the same. It's the first time more people have been pessimistic than neutral on the income outlook.

"If you get good yields in the $3.75 to $4 price range, you can hold things together on corn, but you don't dare have a hiccup in your yield at those prices," Keys said. Also, in the lower price environment, crop insurance provides less protection.

DTN compiles individual index ratings for crop and livestock farmers, as well as regional ratings for the Midwest, Southeast and Southwest. All but one index value was pessimistic. Southwestern farmers appear to be the most optimistic with an index value of 107.7.

"Midwest growers are down the most on their current situation, but Southeastern growers are not far behind," Hill said. "I would expect to see more than usual diversification into crops being planted this year. Where possible, growers might turn to alternatives to corn, beans and wheat, based on economics. In the South this usually means turning to cotton or peanuts, but both of those crops have also seen their prices collapse, so the usual alternatives there are not so rosy either."

A pessimistic index reading for livestock producers at 99.2 is another first in the survey's history. While their assessment of the present is still very strong, their feelings about the economic prospects for the year ahead have taken a sharp downturn.

"Southern growers and livestock producers are sharply negative on expectations vs. a year ago," Hill said. "Livestock profitability is not likely to be as strong in 12 months as it has been, with growing beef supplies and a rising dollar value that is threatening the export market."

Katie Micik can be reached at You can follower her on Twitter @KatieMDTN.