From Purdue/CME Ag Econ Barometer:
Figure 1: Ag Econ Barometer index (blue, left scale), Consumer Confidence (brown, right scale). NBER defined peak-to-trough recession dates shaded gray. Ag Econ Barometer Oct 2015-Mar 2016 = 100. Source: Purdue/CME, Conference Board, NBER.
The trade war has gone on in earnest for over a year — since “Liberation Day”, and now two months of military hostilities with Iran. Despite the well-publicized hits to farm net income caused by the trade war, the barometer remains relatively high — higher than end 2024. This is a manifestation of the phenomenon the Economist noted in “Donald Trump is crushing America’s farmers—yet they back him”
What (empirically) explains the resilience of farm sentiment? One might be tempted to look to high agricultural commodity prices relative to input costs. In Figure 2, I plot the Barometer against the log ratio of agricultural commodity prices to fertilizer prices:
Figure 2: Ag Econ Barometer index (blue, left scale), log ratio of world price of agricultural commodities over fertilizer (red, right scale). NBER defined peak-to-trough recession dates shaded gray. Orange shading denotes Trump administrations. Source: Purdue/CME, World Bank, NBER, and author’s calculations.
Interestingly, a regression of the Barometer on the relative agricultural commodity price and fertilizer price yields an adjusted R2 of only 7%. Notice, graphically, a tremendous amount of variation is explained by the Trump administrations. (AGBAROMETER soundly rejects conventional unit root tests, and fails to reject the KPSS trend stationarity test).
AGBAROMETER = 2.62 + 0.29TRUMP + 1.61AGPRICE – 0.19FERTPRICE
Adj-R2 = 0.34, SER = 0.17, DW = 0.66. Sample 2016M01-2026M04. Bold coefficients indicate significance at the 10% level using HAC robust standard errors.
AGBAROMETER is the 100 point index divided by 100, AGPRICE is the log real (core CPI deflated) price of agricultural commodities, ad FERTPRICE is the corresponding log fertilizer deflated price.
It’s hard to see the relative impact of these variables, so I report the scaled (standard deviation normalized) coefficients below:
AGBAROMETER = 0.70TRUMP + 0.63AGPRICE – 0.31FERTPRICE
In other words, a one standard deviation change in the TRUMP variable in and of itself boosts AGBAROMETER by 0.7 standard deviations.
One would think that farmer support would be crumbling. The Economist article notes:
It would be easy to blame Mr Trump for the downturn; after all, he campaigned on promises to bring down prices and revive the heartland. But rural America does not. The president’s favourability rating is higher among rural voters than among any other group in our survey. Most still think he is doing a good job. In interview after interview with The Economist, farmers said they trust the administration—but that they need help to recoup the losses its foreign policy is causing them.
The sentiment measured by the Ag Econ Barometer pertains to the economic outlook facing farmers It doesn’t assess directly whether farmers think things are going well. Recently, they have taken to asking a “right-direction/wrong direction” question. Here’s the differential, plotted against expectations.
Figure 3: Ag Econ Barometer Expectationns index (light blue, left scale), Country right direction-wrong direction differential, % (purple, right scale). Ag Econ Barometer Oct 2015-Mar 2016 = 100. Orange shading denotes Trump administrations. Source: Purdue/CME, author’s calculations.
Hence, while the “right direction/wrong direction” differential is still positive at 14 points, it is definitely shrinking over the (short) span of data we have.