Year-Over-Year Income Improving for North Central Agriculture, Rabobank Survey Finds

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Jun 01, 2010, 09:00 ET

NEW YORK, June 1 /PRNewswire/ -- According to the Rabobank U.S. Farm & Ranch Survey, year-over-year income for U.S. farmers has improved significantly over findings from the previous two surveys. In the North Central Region, an additional 24 percent of respondents feel more positive about their income – the highest regional improvement.

"What's happening on Midwest farms and ranches mirrors the global economy – we're beginning to see improvement," said Shawn Smeins, Managing Director and Senior Vice President of the North Central Region for Rabo AgriFinance. "That improvement translates into some encouraging – albeit patchy – signs of recovery," Smeins adds.

The Spring 2010 Rabobank U.S. Farm & Ranch Survey results show that U.S. producers report a 24 percent improvement in income since Fall 2009 while about half of the U.S. producer's state income is worse when compared to last year. For example, in the North Central Region in Spring 2010, 58 percent stated their income is worse. In Fall 2009, 82 percent of respondents said the same thing, demonstrating a 24 percent improvement and the highest regional improvement in the U.S.

Future income expectations show the highest index value since the inception of the Rabobank U.S. Farm & Ranch Survey in 2008. Producers expect equal amounts of income improvement and income deterioration in the next 12 months.

Despite optimistic perspectives on increasing income, profits may lag. In fact, the survey found that 43 percent of participating producers reported a decline in profitability. Approximately 20 percent more producers reported higher input or "cost of doing business" costs than lower costs.

"North Central regional agriculture has always been resilient in the face of many challenges," said Smeins. "Producers are accustomed to the cyclical nature of agriculture and are able to better manage their operations by thinking long term and adapting their operations for the future."

In addition to a snapshot of income, the semi-annual Rabobank U.S. Farm & Ranch Survey also looks at the agriculture industry's economic and financial concerns, measures Rural Confidence and investigates expansion plans.

North Central Region Conditions

The survey was developed to gauge the confidence of farmers and ranchers across the United States. However, some regional differences stand out, including that the North Central:

Has seen a reduction in input costs in the previous year where other regions haven't;
Projects the lowest input costs in the next year;
Voices the highest concerns over input costs, calling probable input cost increases its single biggest challenge (30 percent);
Is most likely to make new or used equipment purchases in the next year (35 percent); and,
Remains the only region where future hiring and downsizing is approximately in balance.

Agricultural Economy & Financial Concerns

The ag economy remains a concern with 94 percent of producers, who are nearly equally divided by amount of concern – extremely (34 percent), very (30 percent) or somewhat (32 percent) concerned. These concerns vary little regionally. However, the survey results indicate there has been improvement in the concern for the ag economy in the South and West, while producers in the North Central Region are more concerned than they have been in the past.

Looking ahead, more farmers (51 percent) still expect the ag economy to deteriorate compared to improve (17 percent).

Rural Confidence Index

A key measurement of this survey is the Rural Confidence Index, which is calculated as the percentage of producers who believe the ag economy will improve in the next year less the percentage who believe it will get worse.

Since the last survey in Fall 2009, the Rural Confidence Index has improved slightly by three percentage points, standing at -34. While no significant differences are seen between types of farms, farm sizes or regions, the survey shows considerable differences in the Rural Confidence Index within producer groups, including:

Beef: -19
Row Crop: -46

Dairy: -14

Mixed: -37

Expansion Plans Increase Significantly

The number of producers planning to purchase, rent or lease new land in the coming year is two and a half times higher than previous years. While most producers remain cautious in their plans to hire staff to work that land in the coming year, larger producers plan to employ slightly more people compared to the smaller producers, who were still planning to shed labor in the coming year.

Additionally, little change has occurred in plans for equipment purchases, with slightly less than one third of farmers planning to make a new equipment purchase in the next year. According to the survey results, however, the most significant changes have been in the decisiveness of producers' intentions.

"Producers are much clearer about whether they are going to purchase a new or used piece of equipment," said Smeins. Part of this translates into a new high in intentions to purchase new equipment since the first survey.

Bigger is Better – Sometimes

The Spring 2010 Rabobank U.S. Farm & Ranch Survey takes a general pulse of agriculture in the United States. Several survey items illustrate larger farms enjoy economies of scale, which tend to make them more optimistic.

For instance, North Central Region farms with $1 million to greater than $3 million gross farm income, implemented larger cost improvements, which suggests economies of scale do help producers keep their costs in check.

Larger producers are the most active group in respect to land purchases, with 20 percent of producers planning to employ slightly more people.

Methodology

Insights from agricultural producers – communicated in the Spring 2010 Rabobank U.S. Farm & Ranch Survey – were gathered by Kaliber Americas using Computer Assisted Telephone Interviews. Nearly 600 interviews were conducted in the last two weeks of March and early April. The sample group had a gross farm income of more than $250,000 with further splits for higher income groups in the three major U.S. agricultural regions.

Note to editors: For more information see www.rabobankamerica.com/survey.

Rabo AgriFinance (www.raboag.com), headquartered in St. Louis, Missouri, originates and services agricultural loans for farmers and ranchers throughout the United States. In addition to directly serving thousands of farm and ranch clients, Rabo AgriFinance services agricultural mortgage loans for several third-party clients. As a part of the Rabobank Group, Rabo AgriFinance offers a comprehensive suite of financial services and crop insurance through a network of more than 100 relationship managers and loan production offices. With more than $5 billion in assets under management, Rabo AgriFinance is one of the largest agricultural lenders in America and a part of one of the largest agricultural banks in the world.

SOURCE Rabobank