By Greg D. Horstmeier
DTN Editor-in-Chief
OMAHA (DTN) -- Despite continued flat commodity prices, attitudes of U.S. farmers took a solid leap into positive territory, according to the most recent DTN/The Progressive Farmer Agricultural Confidence Index.
The survey, which tracks farmer opinions of their current and future conditions, had an overall score of 130, a significant improvement from the mostly neutral 98 for the December 2016 survey and a complete flip from the pessimistic 75 score produced in spring 2016.
Since 2010, DTN has surveyed farmers three times a year to determine their opinions about their current economic situation and about that situation in the year to come. Those answers create a score for farmers' "current condition," how they feel about their businesses at the time of the survey, and a score for their "future expectations" for the coming year. Those two scores are combined to create the Ag Confidence Index.
A separate survey, conducted simultaneously, examines agribusiness owner confidence.
The most recent surveys, conducted the first week of March, showed farmers continued to be concerned about current conditions. Answers to questions about their current situation created a level of 70 -- pessimistic, but much higher than the 42 farmers gave conditions back in December.
It was the extremely optimistic scores for the future, however, that gave the overall farmer index its boost. Farmers put their future expectations at a record-high 163.6. That is a jump from 126.6 in December and a complete reversal of the pessimistic 71.7 a year ago.
"Expectations have blown the roof off, more than doubling the index scores of 12 months back," said Robert Hill, economist and researcher who helped create the Ag Confidence Index. "This completely overwhelms the negative movement in present situation to yield a highly positive overall confidence index."
The high future expectation numbers, which began following the November 2016 presidential election, confound Hill.
"As an economist, I've spent a career talking about the dollars and cents of the ag economy in a rational way, without emotion. Historically, it's been about real economic conditions, not politics."
Questions asked in the Ag Confidence survey are specific to income expectations, costs of inputs, and overall business conditions, he said. Farmers are not asked about political, regulatory or other non-revenue-related issues.
In every aspect of this March survey, including input costs, farm income and household income, farmers feel better about things than they did back in December, Hill said. "They feel better about the current situation and they feel better about their future prospects. This is the farming Trump bump."
To explain the optimism, Hill said, he looked to the news headlines around the period the survey was conducted.
The previous week, President Donald Trump signed an executive order instructing the Environmental Protection Agency to examine the business and economic effects of the so-called waters of the United States, or WOTUS, rule. That rule, a regulatory refinement of the Clean Water Act, potentially called for heavier regulation of pesticide applications. Farm groups have fought WOTUS from its inception, even though the EPA under the Obama administration continued to contend it would not be onerous to farmers.
The same week the Ag Confidence Index survey was conducted, Congressional Republicans were finally revealing the details of their "repeal and replace" bill for the Affordable Care Act, also known as Obamacare. While that bill ultimately was pulled from consideration due to lack of support, it captivated Obamacare critics, which included some farm families, for many days after the release.
The overall mood of the country was better, as well. The Consumer Confidence Index, which was released in late March, was at 125.6, its highest level since December 2000, according to the Conference Board, which publishes that monthly survey of consumer sentiment.
David Schemm, a farmer from Sharon Springs, Kansas, and president of the National Association of Wheat Growers, said the regulatory changes under the Trump administration are likely a driver of farmer confidence.
"The whole aspect of regulations that they deal with gives them hope as they look off into the future that these regulations will be dialed back and allow them the opportunity to not be under that pressure," Schemm said. "So I think that is some of that optimism that we see out there."
Farmers are perpetual optimists, Schemm noted. They know that prices, while down currently, are dynamic and can rebound.
"They have seen several years where they were able to build up some reserves. And they are hopeful as they go forward with the dynamics in D.C. that they can get a farm bill that will help them out."
Still, economist Hill is surprised at the enthusiasm. "We're in our third straight year of negative cash flow for a lot of farmers," Hill said.
"The ag bankers I talk to say an increasing number of farm loans are moving from being 'performing' over to the non-performing side of the ledger. The bankers are getting grumpy about cash flows, even if the grower has lots of equity. That's the economic reality."
Craig Adams, who grows corn and soybeans and has a beef cow herd near Leesburg, Ohio, is cautiously optimistic about the future. While he admits conditions aren't great currently, he isn't dwelling on the down side.
"Let's face it, price-wise farmers don't have a lot of options; they are going to be what they are going to be," the 60-year-old farmer said. "We're not going to hit a grand slam this year, but as long as we can work on our cost of production, keep prices at or above that, we'll come through this. We've been here before."
Adams' edge on costs is a purchasing cooperative pool created with other area farmers, which allows them to work directly with distributors to work on volume discounts for crop chemicals and fertilizers. He also uses a grain-marketing broker to help with marketing.
Adams agrees that the executive order pushing back WOTUS was a huge boost to farm spirits. Like a growing number of farmers, he is concerned about the rhetoric around trade, particularly with key U.S. grain and meat customers such as Mexico and China. But he believes that, in the end, common sense will prevail.
"The thing is you have to look at what Trump says, and then look at what he does. He says a lot of things about what he wants to do and goes way off on one side, but what he does eventually ends up back in the middle. I think you just have to take a lot of what he says initially with a grain of salt."
Crop farmers as a group expect better days ahead, producing a 169.7 rating for future expectations despite a gloomy 63.2 rating for their current situation. Livestock producers came in at 89 for the current, 149.8 for the future.
The Midwest and Southwest showed great swings from current to future ratings: Midwestern farmers rated their current plight a 50.4, but gave the future a 153.6; Southwestern farmers scored 78.4 and 169.1. Farmers in the Southeast were much more even-keeled in their optimism overall, creating a 115.6 rating for current situation and 134.7 for the future.
Agribusinesses, as they have in the past, showed a more subdued optimism, and a more even temperament overall. Business owners rated their current prospects at a mostly neutral 96.6, with future expectations slightly more optimistic at 119.3.
The next Ag Confidence Index will be conducted just before harvest in late summer.
Ag Policy Editor Chris Clayton contributed to this report.
Greg D. Horstmeier can be reached at greg.hortsmeier@dtn.com
(AG/BAS)
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