Just as the spring rally in futures prices brightened farmers’ outlook, the summer slump in corn and soybean prices pulled down sharply on the Ag Economy Barometer, say Purdue economists. The monthly survey of producer sentiment fell by 17 points in August for a reading of 95, the lowest since the end of winter.
The 17-point drop was the largest in 10 months for the barometer, measured by Purdue and funded by CME Group. Since mid-June, futures prices for corn for December delivery fell by more than $1 a bushel and soybeans for November delivery dropped by $1.75 a bushel. In addition, USDA forecasts that the corn and soybean harvests this year will be the largest on record.
“This summer’s crop-price declines indicate crop production margins will be even tighter in 2017 than in 2016, leading to questions about the direction production costs will take in the year ahead,” wrote Purdue economists James Mintert, David Widmar, and Michael Langemeier. As part of the survey for the Ag Barometer, growers were asked about their expectations on prices of seed, fertilizer and ag chemicals in 2017.
“At this juncture, more producers expect input prices to rise in 2017 than decline. This was especially true for crop protection products as nearly one-third of respondents expected prices for herbicides, insecticides and fungicides to rise compared to just over 10 percent of respondents that expected these input prices to decline,” said the economists. “The long-term trend for crop input prices to rise seems to be leading to skepticism regarding prospects for input prices to decline, despite the lack of profitability among crop producers.”