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Ag Barometer: Sentiment improves despite concerns

All three broad-based measures of farmer sentiment improved in July. The Purdue University-CME Group Ag Economy Barometer Index rose 8 points to 113. At the same time, the Index of Current Conditions increased by 10 points to 100, and the Index of Future Expectations at 119 was 7 points higher than a month earlier.

July’s sentiment improvement occurred even though prices for both corn and soybeans declined from the time survey responses were collected in June to July, according to a university news release.

For example, Eastern Corn Belt cash prices for corn and soybeans declined 11% and 5%, respectively, from mid-June to mid-July.

Responses to the individual questions used to calculate the indices indicated the sentiment shift was primarily attributable to fewer respondents saying conditions were worse than a year earlier and fewer saying they expect bad times in the future.

Data collection for the July survey took place from July 15-19, which coincided with the dates for the Republican National Convention held in Milwaukee.

When asked about their biggest concerns in the year ahead, the top choice among producers once again was high input costs, chosen by 34% of respondents. However, weak commodity prices were also on producers’ minds, as 29% of producers in the July survey pointed to the risk of lower crop and livestock prices as a top concern, up from 25% of respondents in June.

Only 17% of respondents cited rising interest rates as a top concern, down from 23% in June, consistent with signals from the Fed that interest rates have peaked.

The Farm Financial Performance Index weakened by 4 points in July to 81 leaving the index 6 points lower than a year earlier. July’s decline followed back-to-back improvements in the index in May and June. The index’s fall reflects farmers’ concerns about the impact of weakening commodity prices combined with high input prices.

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Wheat Yields in USA and China Threatened by Heat Waves Breaking Enzymes

Video: Wheat Yields in USA and China Threatened by Heat Waves Breaking Enzymes

A new peer reviewed study looks at the generally unrecognized risk of heat waves surpassing the threshold for enzyme damage in wheat.

Most studies that look at crop failure in the main food growing regions (breadbaskets of the planet) look at temperatures and droughts in the historical records to assess present day risk. Since the climate system has changed, these historical based risk analysis studies underestimate the present-day risks.

What this new research study does is generate an ensemble of plausible scenarios for the present climate in terms of temperatures and precipitation, and looks at how many of these plausible scenarios exceed the enzyme-breaking temperature of 32.8 C for wheat, and exceed the high stress yield reducing temperature of 27.8 C for wheat. Also, the study considers the possibility of a compounded failure with heat waves in both regions simultaneously, this greatly reducing global wheat supply and causing severe shortages.

Results show that the likelihood (risk) of wheat crop failure with a one-in-hundred likelihood in 1981 has in today’s climate become increased by 16x in the USA winter wheat crop (to one-in-six) and by 6x in northeast China (to one-in-sixteen).

The risks determined in this new paper are much greater than that obtained in previous work that determines risk by analyzing historical climate patterns.

Clearly, since the climate system is rapidly changing, we cannot assume stationarity and calculate risk probabilities like we did traditionally before.

We are essentially on a new planet, with a new climate regime, and have to understand that everything is different now.