A recent survey to gauge farmer’s confidence found that, while farmers’ outlook on the economy generally mirrors that of the overall population, more than half of farmers surveyed are employing risk-management strategies to help navigate the difficult economic climate.
“Our survey demonstrates U.S. farmers and ranchers are tackling the current economic environment head on by making smart choices to help them weather the storm,” says John Ryan, president and CEO for Rabo AgriFinance. “While many are hurting because of the economy, there is some optimism that the situation will improve next year.”
According to the Rabobank Farm & Ranch Survey, more than half of U.S. farmers have recently implemented or plan on investing in risk management or marketing strategies. Among those, pre-selling crops/livestock is the most regularly used risk-management approach, followed by hedging future commodity sales and lock-in margins.
“We’re in the midst of difficult financial times, but this survey illustrates farmers are taking steps to mitigate their risk, which will ease concerns about the future,” Ryan says.
However, deployment of risk management strategies varies based on the degree of concern about the U.S. ag economy. While 45% of farmers who are concerned about the ag economy use at least one risk-management strategy, the percentage employing risk-management solutions increases to 60% for farmers who are somewhat concerned and to 80% for those who say they’re not concerned.
Business conditions. While revenue is declining for many farmers, the cost of inputs is improving. Significantly fewer farmers indicate their costs are worse this year (67% vs. 94% in 2008), according to the report. In fact, 30% of farmers expect input costs to decrease.
Additionally, fewer farmers expect conditions to get more difficult when compared to the same period last year. In other words, less than 20% of farmers thought 2009 would be better than 2008, while 30% think 2010 will be better than 2009.
Ag economy & financial concerns. In looking ahead, nearly half of those surveyed expect the ag economy to worsen in 2010, and most are currently concerned about the economy. Nearly nine of 10 farmers are concerned about their own economic situation, and nearly eight of 10 say they would have been more optimistic if current economic conditions had been better, according to the survey.
However, three of every four farmers said their outlook for the future would be more favorable if their own financial situation or the overall economy was better. Nearly 90% of farmers who actively manage risk feel their responses would have been more favorable about the future compared with those who don’t (72%). This survey finding suggests the current economic condition is driving the adoption of risk-management solutions.
Expansion plans. While hiring of employees and land expansion are relatively stagnant among farmers surveyed, U.S. farmers’ intentions to purchase equipment are on par with 2008. The majority of farmers (77%) have kept the same workforce size, and nine in 10 don’t plan to buy or sell land. Additionally, one in three farms expect to purchase farm equipment next year, but will look to used rather than new equipment (43%).
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