When we launched the DTN/The Progressive Farmer Agriculture Confidence Index three years ago, we designed it to be a comparative tool that would help gauge the economic health of the agriculture industry through the lens of producers and agribusinesses. We knew the perspective each index provides would also grow with time.
To compile the index, we ask producers and businesses to rate their current profitability or sales as good, bad or normal. Then we ask them if they expect the situation to get better, worse or stay the same in the next 12 months. The goal is to compare how farmers feel throughout the growing season as things change, as well as how they change year over year.
Now that we have three years of data, we've found that the overall sentiment -- the balance of the present situation and future expectations -- has remained positive during the life of the index. That makes sense; when we set the base year in 2009, farmers were coming off the record prices of 2008 and were being squeezed with high input prices and were feeling downtrodden. Then they had three consecutive profitable years, which likely contributed to the consistently high (index values of 119 plus) assessments of their present situation. Farmers usually expect the situation to be worse a year into the future, and the expectation index values have always fallen on the negative or pessimistic side.
Farmers feel about the same at the end of 2012 as they did in 2011 if you look at the main index score, 109.1 compared to 109.8 last year. While the averages are close, the spreads between the present and future expectations show that farmers are more skeptical now about the upcoming year's potential than they were last year.
It's also interesting to note that in 2012 the range of expectation index values was nearly three times wider than in 2011, reflecting the tumultuous marketing year. Before planting the 2012 crop, farmers said they expected their position going into 2013 planting to be much worse, and the expectations index was 87.4. Before harvest this fall, expectations for the 2013 season rose to 99.8 before falling back to 90.5 in December. In 2011, expectation values stayed between 92 and 96.8 the entire year.
The trends in the DTN/The Progressive Farmer Agribusiness Confidence Index appear to be more cyclical than what we've observed in the producer index. The confidence index value has been pessimistic on two occasions, both pre-harvest of 2012 and 2011. Businesses appear to take a more neutral stance after harvest and are at their most optimistic before planting in the spring, with the two highest overall values occurring in the February/March surveys.
Katie Micik can be reached at email@example.com
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