Survey: Producers Report Improvement In Farm Income

The Spring 2010 Rabobank U.S. Farm & Ranch Survey of U.S. producers reported that little change has occurred in their plans for equipment purchases since the last survey in Fall 2009, with slightly less than one third of farmers planning to make a new equipment purchase in the next year. According to the survey, however, the most significant change has occurred in the decisiveness of producers’ intentions when purchasing equipment.

“Producers are much clearer about whether they are going to purchase a new or used piece of equipment,” said Shawn Smeins, Managing Director and Senior Vice President of the North Central Region for Rabo AgriFinance. “Part of this translates into a new high in intentions to purchase new equipment since the first survey.”

The survey also found that U.S. producers reported a 24% 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% stated their income is worse. In Fall 2009, 82% of respondents said the same thing, demonstrating a 24% improvement and the highest regional improvement in the U.S.

Future income expectations show the highest index value since the inception of the Rabobank 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% of participating producers reported a decline in profitability. Approximately 20% more producers reported higher input or “cost of doing business” expenses than lower costs.

The survey also looked at the agriculture industry’s economic and financial concerns, measured Rural Confidence and investigated expansion plans.

The ag economy remains a concern with 94% of producers, who are nearly equally divided by amount of concern — extremely (34%), very (30%) or somewhat (32%) 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%) still expect the ag economy to deteriorate, compared to improve (17%). 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 versus the percentage who believe it will get worse.

Since the last survey, 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 at -19; Dairy at -14; Row Crop at -46 and Mixed at -37.

For complete survey information, go to: rabobankamerica.com/survey.