Farmer sentiment improves slightly following coronavirus hit in April, analysis reveals

04 Jun 2020 --- Farmer sentiment in relation to the pandemic improved slightly in May after falling sharply in both March and April, according to the Ag Economy Barometer launched by Purdue University and agriculture commodities marketplace CME Group. The index was up 7 points from April to a reading of 103, but it remained nearly 40 percent below its all-time high of 168 set in February 2020. The Ag Economy Barometer is based on responses from 400 US agricultural producers and this month’s survey was conducted between May 18 to 22.

"This month’s survey was conducted the same week that USDA announced the details of the Coronavirus Food Assistance Program (CFAP) so awareness of that program's details could be one of the key reasons for this month’s barometer improvement. Yet some farmers remain worried about their bottom line and are still looking for options to alleviate those concerns,” flags James Mintert, the barometer’s Principal Investigator and Director of Purdue University's Center for Commercial Agriculture.

The Coronavirus Food Assistance Program, or CFAP, provides vital financial assistance to producers of agricultural commodities who have suffered a five percent or greater price decline or who had losses due to market supply chain disruptions stemming from COVID-19 and face additional significant market costs. 

The Ag Economy Barometer’s Index of Current Conditions improved in May, up 11 points from April to a reading of 83, as did the Index of Future Expectations, up 4 points to a reading of 112. 

In May, farmers were also somewhat more inclined to think now is a good time to make large investments in their farming operations, the analysis notes. The Farm Capital Investment Index rose to a reading of 50 compared to just 38 a month earlier. While collectively all three of these indices improved in May, each was down more than 30 percent compared to February 2020, before coronavirus impacted markets.

In the May survey, more than 70 percent of respondents indicated they were “very worried” (34 percent) or “fairly worried” (37 percent) about the impact of coronavirus on their farm’s profitability, up from 67 percent in April. Their two biggest concerns were market access (42 percent) and financial (39 percent), with health and safety (11 percent) coming in third. Providing further evidence of their financial concerns, two-thirds of farmers surveyed indicated they think it will be necessary for Congress to pass another bill to provide more economic assistance to US farmers.

When asked about expectations for their financial position over the next 12 months, over 60 percent said they expect farmers’ equity positions to decline over the next year, up sharply compared to 28 percent of farmers who felt that way in February 2020. 

Meanwhile, over 25 percent of farmers surveyed who rent farmland said they expect to ask their landlords to lower their cash rental payments in 2021 as a result of COVID-19. Looking ahead, Mintert suggests this could lead to downward pressure on cash rental rates next year.

Stakeholders in the agri-food sector have needed to significantly pivot to adapt to the coronavirus crisis. In this context, the role of the commodity merchants during the pandemic has become more important than ever in ensuring a continuous flow of food from farmers to end-consumers.

For more pandemic-related industry updates, readers may visit our new daily news feed entitled “COVID-19 updates” for relevant insights needed to guide your business through this challenging period.

Edited by Benjamin Ferrer