By Katie Micik
DTN Markets Editor
OMAHA (DTN) -- Farmers' feelings about the ag economy continue to fade while agribusinesses' sentiment took a steep dive, according to the latest results of the DTN/The Progressive Farmer Agriculture and Agribusiness Confidence Indexes.
The latest reading of the Agriculture Confidence Index, which measures the attitudes of 500 farmers across the country, came in at 91.5, the lowest since DTN began surveying farmers in 2010.
That compares to an index value of 92.7 in December and 98.8 in March 2015. An index value of 100 is considered neutral, while higher values indicate optimism and lower values reflect pessimism. Calls were made from March 1 to March 10. DTN conducts the survey before planting, before harvest and at the end of the year to gauge farmer attitudes at key times of the growing season.
"Farmers are very sour on their economic prospects," said economist Robert Hill, the index's creator and owner of consulting firm Caledonia Solutions. "The biggest change we see from a year ago at pre-plant time is a big surge in the portion of farmers who are calling current net farm income 'bad,' and a large drop-off in those calling it 'good.' Their view on current input prices has also eroded since last year."
Farmers aren't expecting a turnaround within the next 12 months, and "they hear many commodity market analysts saying it could be three more years before things bounce back," Hill said.
The confidence index is an average of farmers' and ranchers' assessments of their present situations and their expectations of conditions 12 months from now. Farmers' expectations for the year ahead, pegged at 89.5, show they're settling in for a prolonged down cycle.
Experts estimate the average Kansas farmer's net income for 2015 will see a loss of $30,000. The forecast is for more of the same in 2016.
"As far as overall outlook, we're very concerned about things," Vance Ehmke, who farms in Healy, Kansas, told DTN. "Virtually all markets are below cost of production, and we're just really worried about that."
One headwind is the strong U.S. dollar, which Ehmke thinks will stick around for another two years.
"I'm not looking for any major recovery at all for at least one more year and most likely two. Then we'll see where we're at in terms of what's happened to land and that type of thing."
AGRIBUSINESS BLUES
The Agribusiness Confidence Index came in at 83.4, down more than 15 points from December's 98.3 reading and more than 21 points from the previous March's 104.7 reading. DTN surveyed 100 local agribusinesses between Feb. 29 and March 10.
The survey included grain elevators, seed salesmen, crop insurance agents, bankers, agronomists and a wide variety of other local agribusinesses that provide goods and services directly to farmers.
"This could be one of those years where farmers might be able to strike good deals on last-minute input purchases, since the channel seems to be well-stocked with inputs that are not spoken for," Hill said. "This makes for nervous suppliers and manufacturers, and at least a few growers may work this to their advantage."
Only 33% of businesses consider sales to be good, while another 46% think they're normal. Those numbers are down sharply from December's 55% and 37%, respectively. A full 18% think sales are bad, and that's up 11 points from December's survey.
Location and other circumstances can affect the opinions of business owners.
For example, business is good at Keller Grain and Feed in Greenville, Ohio. The avian influenza outbreak missed the area, and led the county to become one of the nation's largest egg producers, according to grain buyer Matt Aultman.
"When you have that kind of money flowing into the economy, it's not as bad as it is in other regions," he told DTN.
The feed side of the business is also picking up. Aultman said it seems there are more hobby farmers feeding a steer or two. He doesn't think the big livestock operations are going to expand or shrink much this summer.
Farmers still aren't selling grain despite Aultman's basis: 22 cents over the May corn futures contract.
"There's hardly any selling going on, and I think that's a nationwide thing. They've got a magical number in their mind of where they want to be," he said.
Farmers are unlikely to get in the fields near Greenville until mid-April because of how wet the past few weeks have been. If it turns into a long planting season, he could see farmers switching acres to beans.
The year ahead is tough to predict.
"Tell me who is going to be president and I'll tell you which way the markets are going to go," he said. The fate of the Trans-Pacific Partnership is up in the air, but there are many pending regulations that could change. This includes the Renewable Fuel Standard, the Food Safety Modernization Act, and the Waters of the U.S. rule.
"It's all going to hit here at the same time," Aultman said.
MISERY LOVES COMPANY
DTN also breaks out data for crop farmers and livestock farmers, and the crop producer confidence index came in at 89.7, the lowest in the index's history. Their ratings of the present situation and expectations for the year ahead are consistently pessimistic at 88.4 and 90.6, respectively.
"Farm safety nets seem to be unraveling as well, with the Obama administration calling for substantial cuts to the farm program budget just at the time when farmers may most need them," Hill said. "Further, growers may not see a cash flow benefit from the 2014 farm bill until late in 2016. This adds even more uncertainty and risk to their personal situations."
The index for livestock producers has fallen in five of the last six surveys, and dropped to 95.9 from December's 96.4.
However, livestock producers feel positive about the present situation; they rated it at 109.5. But, they are wary about what the future holds. That index value was 86.8.
RENTS RETRACT, BUT INPUTS STILL STING
Forty-seven percent of the respondents to DTN's survey think current input prices are bad. That's one of the highest readings in the survey's history, but it's down 5 points from the December survey.
"Growers are taking a hard look at their inputs," Hill said. "Look at the grower crop budgets, and it's easy to see why they are trying to reshape their input expenses in the big three categories: landlords, fertilizer, and seeds."
Many farmers delayed fertilizer purchases last fall, and their procrastination was rewarded with lower prices. Fuel prices have also offered some relief. However, seed and chemical costs remain high, keeping the pressure up on farmers to manage expenses.
"For seeds, more growers are questioning the need for those Cadillac hybrids that come with the highest per bag premiums," Hill said. "We see cash rents coming down 5% to 10% annually now, with some growers being forced to walk away from their leases after banks refused funding."
Adam Stonecipher, vice president of commercial and agribusiness banking at First Midwest Bank in Danville, Illinois, said it's refreshing to see cash rents come down.
"I've heard of several farmers that have given up leases on less profitable acres, and that's exactly what we need to happen in this economic reset," he said. "Gone are the days when simply working hard could result in success. Now we have to work hard and work smart by appropriately managing our risk and making tough decisions."
Ehmke said land prices are softening a bit, and he thinks a lot of effort will be put into cash rent negotiations in 2016. That's interesting, he said, because some landlords felt "like they weren't invited to the party" during the good times and are taking a tough stance.
But for farmers, how rents, input costs and the weather affect their net income will be the bottom line.
"We're getting ready to gravitate to the mean," he said. "There are really good years and really bad years, and things average out. That's what we're in the process of doing."
For more information about the index, please visit http://about.dtnpf.com/…
Katie Micik can be reached at Katie.micik@dtn.com
(ES/CZ/AG)
© Copyright 2016 DTN/The Progressive Farmer. All rights reserved.