WEST LAFAYETTE, IND. — Producer sentiment regarding current economic conditions of the U.S. agricultural economy dropped 12 points in December, according to the Purdue University/CME Group Ag Economy Barometer.

The Index of Current Conditions, released on Jan. 7, registered a reading of 141, down from 153 in November. Meanwhile, the Index of Future Expectations remained strong, up 2 points in December to a reading of 155. The Ag Economy Barometer, which encompasses results from both indices and is based on a mid-month survey of 400 U.S. crop and livestock producers, dropped 3 points in December to a reading of 150, down from 153 in November.

“Agricultural producers in December were less optimistic about current economic conditions on their farms than a month earlier but remained optimistic about future economic conditions,” said James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.

In the December survey, producers were asked whether their farm’s 2019 financial performance was better, as expected, or worse than their initial budget projections. Just over-half (52%), said their initial projections matched their farm’s financial performance; 30% said it was worse; and 19% said it was better than expected.

“These results are indicative of the variability in economic conditions on U.S. farm operations, with some farms performing better than expected and others worse than expected,” Mr. Mintert said.

To better assess the level of financial stress among U.S. farms, producers were asked in both the November and December surveys whether they expected their farm’s 2020 operating loan to be larger, about the same, or smaller than in 2019. In a follow-up, those who expected a larger loan were asked the reason why they expected their loan to increase. Approximately 1 out of 5 farmers on the two surveys indicated that they expect to have a larger operating loan in 2020 compared to 2019 and, of those, 3 out of 10 indicated that the reason for the larger loan is unpaid operating debt from 2019. Carrying over unpaid operating debt from year-to-year is an indicator of financial stress, and these results suggest that about 6% of farms surveyed for the Ag Barometer in late 2019 were experiencing financial stress.

Most producers surveyed said they expect stable cash rental rates in 2020. From October through December, producers were asked whether they expect changes in rental rates in the coming year. More than three-quarters of survey respondents did not expect a change, between 8% to 9% expected a rise, and between 13% to 14% expected a decline in rental rates.

Producers remained relatively optimistic that a resolution to the ongoing trade dispute with China will take place soon and that the outcome of the dispute will benefit U.S. agriculture. In December, 54% of respondents said they expect a resolution to the trade dispute soon which, although down from 57% in November, was still the second most positive response to this question since last March. The percentage of producers who expect the outcome will ultimately favor U.S. agriculture dropped to 72%, down from 80% in November. Since this question was first posed in March 2019, over 70% of respondents have, on average, indicated they expect a favorable outcome to the trade dispute for U.S. agriculture.