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Poor Confidence

Written by Dennis Sun

One doesn’t have to be a rocket scientist to make the statement that grain and livestock markets are down, but you still need something to quantify the drop. I was happy to see DTN The Progressive Farmer come out with their “Ag Confidence Index,” which was just released. This index has come out three times each year since 2010 – before planting, before harvest and after harvest. A score of 100 on the Index is neutral.

As I see it, it did represent farming more than livestock interests, but for sure, livestock was involved.

Either way, the index continues to fall. Lower commodity prices, ongoing higher input costs and lower income projections have ag producers feeling more pessimistic about their industry than ever before, according to the latest Agriculture Confidence Index (ACI). Let’s face it – commodity prices are down from record prices we saw a few years ago, as are livestock prices, but it wasn’t too long ago that we had record prices for cattle producers. While I do believe grain prices didn’t tank as fast as cattle, their future may be more clouded.

If we look at almost all ag products, they have been jumping both up and down the last few years. What hurts are the extremes our prices have reached. These extremes make it hard to plan for the future and take information to the banker. Bankers call it “volatility.” We know we have to have a bad part to have a good part, and we had our good part. It just wasn’t long enough.

Back to the ACI, findings of the March 2016 survey were that 45 percent of farmers described their farm income as bad, and 40 percent said their income was good. But it was the second consecutive survey in which more producers considered their current farm income bad rather than normal. Eighty-six percent of the producers surveyed expect farm income to stay the same or get worse. I would guess the survey was taken before gas and diesel prices started rising.

Other survey stats included that 47 percent of crop and livestock producers rated input prices as bad. They must have bought tires, too. But 18 percent of producers surveyed say input prices will get better in the next year. Livestock producer confidence fell for the fifth time in the last six surveys to 95.9, with present situation at 109.5 and future expectations at 86.8.

Agribusinesses are also pessimistic about the current situation and expectations for the next year. The rating for agribusiness’ present situation fell to an all-time low of 88.3 from a near record high of 121.6 in March 2014 and 114.5 last March.

For farmers, virtually all markets are below cost of production, and some think the high dollar will be around for a couple of years, which also hurts the meat export markets. Aside from the high dollar, farmers are still paying high land rental prices, and that will have to change to please the bankers out there.

So, ag producers and agribusinesses, don’t look for good times for a couple of years. Remember this is a presidential election year, and getting someone in the White House with a positive outlook who doesn’t apologize for the U.S. every time they leave the country will sure help.

Having a positive attitude may not feed the family, but kicking the can down the road won’t either.