Escalating concerns about a possible trade war and falling commodity prices have led to a sharp drop in agriculture producer sentiment. The Purdue University/CME Group Ag Economy Barometer fell 26 points in July, marking the largest one-month decline since the first measurement in October 2015.
The barometer’s results are based on a monthly survey of 400 ag producers from throughout the U.S.
James Mintert, principal investigator for the barometer and director of the Center for Commercial Agriculture at Purdue,m says tariffs placed on imports of U.S. ag products by China and Mexico are impacting producers’ bottom line. He says more than two-thirds of producers who responded say they expect to see lower net income because of trade conflicts.
Mintert adds commodity prices have seen a sharp drop over the past two months and producers fear those prices will remain low or possibly fall even further. Nearly half of producers said they expect corn and soybean futures to drop below $3.25 per bushel and below $8 per bushel, respectively.
"Prices in that range would result in a significant cash flow squeeze for many farm operators,” said Mintert. “While prices at those levels would cover variable production expenses, it would leave some farmers falling far short of covering fixed and overhead expenses.”
You can read the full July Ag Economy Barometer by clicking here and hear more from Mintert in the video below: