Ag Confidence Index Results

By Katie Micik
DTN Markets Editor

OMAHA (DTN) -- Crop and livestock farmers' attitudes toward the agriculture economy are vastly different, according to the latest reading of the DTN/The Progressive Farmer Agriculture Confidence Index, yet their combined sentiment remains positive.

The pre-planting Agriculture Confidence Index for all farmers is 106.9, identical to a year ago. While 2013 and 2014 spring indexes match, farmers' attitudes which make up subsets of that index have changed dramatically. Present incomes may be lower, but the aura of uncertainty surrounding grain prices dissipated, leaving farmers less worried about the future.

An index value of 100 is considered neutral with higher values indicating optimism and lower values reflecting pessimism. DTN surveyed 500 farmers and ranchers across the country between March 1 and 10. DTN conducts the survey before planting, before harvest and after harvest each year to gauge farmers' attitude at key times of the crop cycle.

"Midwest operators are really down on the present situation -- an attitude that turned sour around harvest last year and stayed down since," said Robert Hill, owner of Caledonia Solutions and designer of the survey. "This likely reflects the big drop in corn prices about the middle of last year, which have not recovered but have at least stabilized."

Corn and soybean prices will still afford farmers decent margins, even if they're down from historical highs, he said. "It also helps that input prices seem to be down slightly."

Farmers' healthy balance sheets and stabilizing prices also boosted the agribusiness sector's confidence. The DTN/The Progressive Farmer Agribusiness Confidence Index, a similar survey of 100 agribusinesses conducted between Feb. 28 and March 5, increased to 107.3 from 104.3 last year.

A record 72% of respondents said their current sales of goods and services to farmers were good, while another 27% said sales were normal. Profitability is up from last year, too, and the survey results indicate businesses see strong sales and profits continuing.

CROP, LIVESTOCK ATTITUDES DIVERGE

DTN's Agriculture Confidence Index is composed of two parts. Each survey asks farmers to assess input prices and net farm income as good, bad or normal to gauge their attitudes toward their present situation. To get a grasp on future expectations, it also asks if farmers expect input prices and income to get better, worse or stay the same 12 months down the road. DTN then compiles the findings into an overall index value, a present situation index and an expectations index.

Farmers rate their present situation at 128.1, a decline from last spring's 135.3. The index for farmers' expectations of the year ahead came in at 92.8. That's a pessimistic reading, but an improvement over last year's 88.2.

DTN also breaks out indexes for crop producers and livestock producers, and here the attitudes are greatly different. Crop producers' overall index value is 102.7. While positive, it's the lowest reading since the initial survey set a neutral value at 100 in April 2010.

The overall index for livestock producers came in at 116.4, just two-tenths below the highest all-time reading. Livestock producers' present situation index was the highest the survey has registered in any category.

Last spring, farmers' grain bins held precious kernels of expensive corn, and timely sales buoyed their income. The record 2013 corn crop erased much of the present situation confidence: That year grain producers gave a 135.2 rating to present situation, dropping to 120.8 in the most recent survey.

Going into the planting season, new-crop corn prices are roughly 10% lower than last spring's new crop, and the old-crop corn in farmers' bins is worth 33% less than last year. Many economists are calling for increased soybean acres as stockpiles dwindle and projected returns favor soybean planting.

With crop producers conceivably refilling the soybean supply pipeline and adding to corn supplies, downward pressure on prices and profits for both crops could be on the horizon.

Allie Wilson raises corn and soybeans in Peru, Ind. He expects income will be down in 2013. Last year's good but wind-damaged yields just couldn't overcome the lower prices. Yet he could see income in 2014 could go either way. If the weather cooperates, farmers could add to supplies. If it doesn't, a production shortfall could rattle the markets higher.

"It all depends on what Mother Nature gives us this growing season for 2014 farm income," Wilson said.

Livestock producers, on the other hand, benefit from lower crop prices. They're also benefiting from record high meat prices driven by tight cattle supplies and disease concerns in hogs.

The present situation index for livestock came in at 145.1, the highest present situation score not just for livestock producers but for all categories that DTN tracks.

"Livestock producers are relatively ecstatic about their economic situation and prospects. Their margins are looking good as their input prices are down and meat prices are up," Hill said. "What's not to like about that?"

Livestock farmers' future expectations index still falls in the pessimistic range at 97.3, but it's the highest since September 2010, which corresponds to the last prolonged period of profitability in the cattle sector.

STABILIZING PRICES BOOST AGRIBUSINESS CONFIDENCE

Agribusinesses are much more optimistic than they were in December. While businesses' assessments of the current situation increased by less than 1 point to 121.6 from 120.7, their expectations for the future shifted upwards by 7.5 points.

"They know their customers should still be operating with healthy balance sheets and decent margin prospects," Hill said. "Seeing crop prices stabilize likely played a big part in their improved outlook. Fertilizer dealers might be concerned about the loss of fertilizer sales and profits as the growers reduce corn and increase soybean acreage planted, but this seems to have been taken into account before the end of last year."

Rick Dunbar, manager of Edon Farmers Cooperative in Ohio, said fertilizer sales were down last fall, but attributed it to wintry weather bringing fall to an abrupt end. Farmers stick to their rotations in his northwest corner of Ohio, and that helps keep his sales steady from year to year.

"As we go forward here, it looks to me like we're going to be accumulating grain," Dunbar said. "Unfortunately, I think prices are probably going to be lower." That may hurt business a little, likely in form of lower fertilizer use.

Eighty inches of snow fell in Edon this winter, and Dunbar hopes the spring thaw comes soon.

"If it gets late and we have a short spring it's going to hurt us," he said. "It's not because the farmers will change anything, it's just because of the weather delays. It's still early, though. Most farmers, if they're planted by the middle of May, they'll be happy."

For more information about index methodology, please visit http://about.dtnpf.com/…

Katie Micik can be reached at katie.micik@dtn.com

DTN Staff Reporter Russ Quinn contributed to this story.

(GH/ES/CZ/SK)

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