The Ag Economy Barometer turned higher in June with the index settling at 104, reports Purdue University’s Center for Commercial Agriculture. The June agricultural sentiment reading was higher than during the six-month base period, which averaged 100 between October 2015 and March 2016 and was also stronger than May’s reading of 97 (Figure 1). June marked the third month in a row that the Ag Economy Barometer was markedly stronger than the nine-month low of 85 set in March 2016. However, the sentiment index during June was still lower than the post-harvest high of 116 set in October 2015.
|Figure 1. Purdue University/CME Group Ag Economy Barometer, June 2016|
Evaluating the Ag Economy Barometer more closely reveals the uptick in the barometer was driven primarily by an improvement in the Index of Current Conditions, which jumped up to 98 in June vs. 83 in May (Figure 2). Additional upward support was provided by the Index of Future Expectations, which is typically more stable than the Index of Current Conditions. The forward-looking index settled higher at 107 in June, equal to its April 2016 level.
|Figure 2. Producer Index of Current Conditions and Index of Future Expectations, June 2016|
A key driver supporting an improvement in producer sentiment, especially their perspective regarding current conditions, has been strength in corn and soybean markets. During June, corn and soybean prices both traded in ranges not observed since summer 2015. This was especially the case for soybean prices, which approached $12 per bushel, well above the $8.75 observed in late April and $9.80 last July (Figure 3). Overall, grain and oilseed prices both trended higher during the last three months.
|Figure 3. Future Price of November 2016 Soybeans. Data Source: CME Group, Accessed June 28, 2016|