Farmer confidence plunges as trade war expands

Although most producers say Trump tariff payments will “completely or somewhat” relieve the impact of the Sino-U.S. trade war on their operations, farmer confidence is plummeting, according to a Purdue University poll released Tuesday. The Ag Economy Barometer, a gauge of the health of the agricultural economy, fell from a record high of 153 in July to the lowest reading — 124 — since May.

The 29-point drop in August was the largest month-to-month change since Purdue began the survey of farmer confidence in October 2015. The barometer is based on a monthly survey of 400 farmers and ranchers nationwide.

Farmers have stood by President Trump throughout the trade war but that support could be wavering. Trump drew a 71-percent approval rating among farmers in a Farm Journal straw poll in late August, compared to 79 percent in July. Some 43 percent said they strongly approved of Trump’s job performance, a drop of 10 points in a month.

“There’s more angst, probably, on ethanol than there is on China,” said Iowa Sen. Chuck Grassley on Tuesday, referring to Farm Belt anger over biofuels. “The EPA has continued to under-cut the RFS [Renewable Fuel Standard] in order to satisfy oil industry interests.” Farm groups say the administration exempted so many oil refineries from complying with the RFS that ethanol usage will be more than 1 billion gallons smaller than it should be.

“Making great progress for our Farmers,” tweeted Trump, pointing to approval of year-round sales of E15, a richer blend of ethanol into gasoline than the traditional 10 percent. “Big additional list to be submitted & approved within two weeks. Will be even better for Ethanol, and we save our small refineries!”

The Purdue barometer has soared and plummeted this year, seemingly in response to the trade war and commodity prices. It fell to 101 in May, for its lowest reading of the year, and climbed to 153 in July, the highest reading ever and tied with the “Trump bump” of January 2017, when the new administration took office.

“Sharp declines in most commodity prices during July and early August weighed heavily on farmer sentiment this month,” said Purdue economist James Mintert, adding “farmers are becoming more concerned about the future of U.S. agriculture and their farms.”

Commodity prices fell during an expansion of the trade war, with President Trump announcing 10-percent tariffs on $300 billion of Chinese-made imports and Beijing cutting off purchases of U.S. ag exports just before Purdue surveyed farmers. In addition, the USDA forecast a larger than expected corn crop. Since then, both nations announced additional tariffs.

In late August, the USDA began disbursement of up to $7.25 billion of trade-war payments. Two additional rounds of $3.6 billion apiece are possible in November and January. When asked if the Market Facilitation Program payments relieve their concerns about the impact of retaliatory Chinese tariffs on their farm income, 7 percent chose “completely,” 64 percent “somewhat” and 29 percent “not at all.”

By nearly a 2-to-1 margin — 58 percent vs. 32 percent — producers said they expected the administration would provide trade-war payments on 2020 crops. Ten percent were uncertain. Purdue said the responses indicated “a majority of farmers are counting on payments from USDA helping to make up future income shortfalls.”

Since late winter, farmers have said they are highly confident the trade dispute with China will be resolved in a way that benefits U.S. agriculture; 72 percent held that view in the August poll. But they do not expect a settlement soon. In the latest poll, 71 percent said a settlement was not likely in the near term.

The Purdue Ag Economy Barometer is available here.