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Farmers less confident as harvest nears

By Staff | Sep 23, 2011

Harvesting in the Hamilton County area got underway last week. A crew was apparently taking a break from their machines Sept. 15 during the early-harvest season a mile north of Highview.

OMAHA (DTN) – Farmers remain optimistic about the ag economy, although cautiously so, according to the latest DTN Agriculture Confidence Index.

The survey, which tracks farmer attitudes about the current economic climate and their expectations for the future, still shows values in positive territory, though there is a modest deflation in attitude.

Gary Adams, a Humboldt area farmer, said he isn’t as optimistic as he was last spring and his attitude mirrors those expressed by farmers surveyed for the ag confidence index.

“We had an excellent spring. Perfect weather, good emergence, good weed control. No issues at all. It should have been a bin-buster crop,” Adams said.

“But then, in early July, our rain just shut off. Our beans look good, but we definitely took the top off our corn yields,” he said. Adams believes his yields will be 25 percent below 2010 field averages. “Of course, prices are up, so our financial situation may not be too different, but that remains to be seen.”

The most recent DTN survey of 500 producers resulted in an overall Confidence Index of 108 versus 111 in spring. Numbers above the 100 level are deemed positive, below 100 indicate a pessimistic mood. In the survey, crop and livestock producers are asked to describe the current prices paid for farm inputs as good, normal or bad and whether they expect them to be better, the same or worse 12 months from now.

They also are asked to rate net farm income for the current crop or livestock cycle as good, normal or bad and, looking ahead 12 months, whether it will be better, the same or worse. Similar questions are asked about total household income.

Ratings are tallied for the current and the future situations, and an overall confidence index number is calculated.

The most notable change is a reduction in attitudes toward their present situation, which dropped from 148 in the pre-planting survey to 128 currently. Their rating of prospects for the next 12 months, while up slightly from 91 in spring to 94 now, remains below the 100 mark. Producers were surveyed between Sept. 1 and Sept. 12.

“Farmers are feeling pretty good about their current situation — actually, just a little better than a year ago at this time, and that was pretty good, too,” said Robert Hill, principal at Caledonia Solutions in North Oaks, Minn., who helped design the survey. “But when they are looking down the road, they are clearly losing faith that the good times in ag can continue.”

Regional effects

Midwest producers revised their views the most, with their overall index dropping from 142 in the spring to a still-positive 112 now. Their rating of the present situation plummeted from 186 to 135, while their expectations for the next 12 months were reduced more modestly, from 111 in spring to 97 now.

“It’s been a terrible year,” declared Tim Kimpel, who grows organic corn, soybeans, small grains, hay, hogs and grass-fed cattle near Roseville, Ohio. “We’ve had rain, rain, rain and more rain. I should have planted more than 200 acres and only got 17 acres in.”

Southeast producers’ confidence index actually rose modestly, from 94 in the spring to 99 now, mainly because their expectations for next year rose from 70 in the spring to 83 now. Like Midwest farmers, producers in the Southeast trimmed their present situation rating considerably, from 162 to 122. The primary reason behind this appears to be the spreading and worsening drought.

“Mother Nature was about as kind as could be between February and April, then we turned dry,” reported Dwaine Horton of Pitkin, La. “Now we are struggling to keep our cows going by buying hay and feed.” Feed costs Horton twice as much as normal because of strong demand, he added, noting that even byproducts such as rice bran have soared — from $40 to $70 a ton normally to $150 to $200.

“We are going to make it one way or another,” Horton said. “But I really wonder how the cow numbers are going to play out once the sell-out is over. How much higher prices can the consumer stand? If we kill demand, it may be hard to get it back.”

Not surprisingly, in the Southwest, where the heat and drought have broken record after record, producers have trimmed their index from 117 last spring to 101 now, bolstered by the belief that things will be better 12 months from now, which rose by 10 percentage points. The rating for the present situation was almost unchanged, at 118 now versus 117 last spring.

Crops more positive

Although the index has narrowed between crop and livestock responses, crop producers still rate their situation slightly higher than do livestock producers, at 108 versus 104, respectively. Interestingly, growers have lower expectations for the next 12 months than they had in the past spring, while livestock operators expect things to improve during the next 12 months.

Future perspectives

More producers say current input prices are “good” than said so in spring, and even more than said so a year ago. Those who say input prices are “bad” fell from March to now. Looking out 12 months, attitudes are less rosy.

“Producers see a margin squeeze in their future,” said Hill. “Stories about out-of-control cash rents have many farmers shaking their heads in disbelief. Some worry that seed will be in short supply next year given this poor production year. And resistance to glyphosate and possibly corn rootworm could add to the cost of production.”

Producers interviewed for this story confirm the concern about higher input costs. “We are in an inflationary environment. Prospects for fertilizer, fuel, everything we buy, are looking pretty grim from a buyer’s point of view,” said Adams. “I don’t plan to put on any fertilizer this fall. I did apply it heavily the past two years. I’ll test in the spring and apply only what I need, considering weather conditions as well.”

Richard Meyer, who farms near Weeping Water, Neb., agreed. “The cost of business is constantly increasing. If grain prices are high, everyone wants a piece of it — and input sellers can charge more and get it. Starter fertilizer is up about $30 to $40 a ton,” he said, as an example. He believes although inputs will be up next year, the rate of increase may not be as much as this year.

USDA projects record net income in 2011, but farmer expectations for net farm income 12 months from now have dropped, both because of expected higher input costs and because of worries that prices for production may fall.

Farmers predicting better net farm income in 12 months fell from 24 percent of respondents a year ago to 21 percent in spring 2011, to 16 percent now. About 33 percent expect it to be worse, about equal to the 33 percent found in spring, but well above the 24 percent found in fall 2010.

“I’m cautiously optimistic,” said Adams. “It’s pretty exciting to see $7 corn and $14 beans. In my lifetime, I’ve sold more corn under $2 than over $3. But I worry that with ethanol subsidies gone and farmers planting fence-row-to-fence-row, corn prices next year could be lower,” said Adams. He said he’s looking for opportunities to do some forward pricing.

Meyer figured if he can get $6.50 or better cash for corn, he’ll also forward price some 2012 production.

“I think, on the whole, we’ll find a lot more corn next year,” he said, though he’ll stick with his normal corn-soybean rotation. He noted that Farm Credit lenders use $4 corn in their 2012 budgets. “We could see margins pinched some given input costs. As has been the case, the big will get bigger and the smaller farmers will fade away.”

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