Thursday, June 3, 2010

Farm, ranch profits rising, bank survey shows

Agriculture online's Jeff Caldwell reports that farmers responding to the annual Farm and Ranch Confidence Survey conducted by Rabobank report a general 24% income improvement since last fall. That's not to say incomes are 24% higher than a year ago; last fall, 82% of those responding to the Rabobank survey said their incomes had fallen since the previous spring. In this spring's survey, 58% said the same thing, accounting for the 24% improvement, Rabobank officials say.

"What's happening on U.S. farms and ranches mirrors the global economy -- we're beginning to see improvement," President and Chief Executive Officer for Rabo AgriFinance John Ryan says in a company report. "That improvement translates into some encouraging -- albeit patchy -- signs of recovery."

What's more telling than current income projections is the outlook for future revenues. Rabobank officials say this latest surveys hows the highest degree of confidence for future income potential since the survey was started in 2008.

That increasingly optimistic outlook is manifesting itself in growing interest in farm expansion than a year ago. Ryan says many of the larger farmers responding to the survey said they are "more interested" in expanding land or equipment in the coming months.

"Producers are much clearer in whether they are going to purchase a new or used piece of equipment," Ryan says. "As with any business, there are benefits and challenges at any size and industry -- agriculture is no different. Every farmer or rancher has unique needs and business considerations. The key is finding the right balance for each operation."

The Rabobank survey isn't all sunshine for the ag sector, however. Economic hurdles like input costs remain a concern for many farmers; 20% of those surveyed said their general input costs are higher than they were last fall. And, overall economic stability is still a big concern: 94% surveyed say they're still concerned about the ag economy. Though there's little variation geographically in this section of the survey results, Rabobank officials say there is at least one clear message in the survey results. "The survey results indicate there has been improvement in the ag economy in the South and West, while those in the north-central states are more concerned than they have been in the past," according to a Rabobank report.

Ultimately, though many said they still expect a shaky economy through the next few months, Rabobank's Ryan says as long as balance sheets remain healthy, the ag sector should stay above water.

"U.S. agriculture has always been resilient in the face of many challenges," Ryan says. "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."

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