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Farmers pessimistic about 2010 economic conditions

By ANN HINCH
Assistant Editor

OMAHA, Neb. — A statistical analysis may have confirmed what many have suspected for years – farmers are pessimistic about their personal economy.

The new Agriculture Confidence Index, produced by DTN/The Progressive Farmer, is intended to do for the nation’s farmers and agribusinesses what the Consumer Confidence Index does for the general economy.

Early last week, DTN published the results of its first-ever survey for the Index, which it plans to conduct three times a year: in April, before planting; in September, before harvest; and in December, post-harvest and at year’s end.

The point, said DTN Product Manager Mary Rose Dwyer, is to give people in the ag industry a look at its overall health via the sentiments of producers themselves – boots in the field, so to speak.

She explained, “We really just wanted to know what farmers think about the economy.” And it’s not rosy.

The first index is 34.2. “That’s not close to being neutral, and it’s not optimistic,” Dwyer pointed out.

Farmers are asked to give a numerical rating to five questions with 50 representing a neutral sentiment. Anything above a 50 is considered optimistic; anything below, pessimistic.

This Index, however, has current and future sub-indices. The present situation ranks a much less-hopeful 30 – but expectations for this time next year are up, at nearly 37. “It’s encouraging to see (farmers) are optimistic for the future and we are seeing some things turn around for them,” she said.

“It’s hard to tell when we’ll ever get a number over 50,” she added, explaining the culture of farming lends itself to underestimating one’s own good fortune, and a certain amount of pessimism. “Every time they plant, they’re taking on a huge amount of risk.”

The difference between the Present Situation Index at 30 and the Expectations Index at 36.9 is statistically significant, said Robert Hill, economist and owner of Caledonia Solutions, the research and consulting firm for agribusinesses that designed the Index for DTN.
In the Present Index, livestock producers were more bearish than growers (26.8 versus 31.2), but for the Expectations Index were relatively more optimistic (40.1 versus 35.6). Hansen said livestock producers’ current extreme pessimism jived with his observations.
“The last two years have been the toughest go for the livestock sector generally, led by hogs, with dairy close behind,” while the grains have varied more regionally,” he said.

Dwyer hopes farmers will use the Index to gauge their personal business prospects, and agribusiness owners will use it to make short- and long-term financial decisions.

Here’s how it works: Three times per year, DTN will survey 500 randomly selected farmers by phone, asking five questions. The questions gauge each farmer’s appraisal of current input prices and their outlook of those prices 12 months into the future; appraisal of their current farm income and outlook in 12 months; and gross household income within the next 12 months. The Index is calculated from these responses.

DTN’s 500 farmers are drawn from sample quotas off of data taken from the most recent USDA Agriculture Census – they are not just DTN customers. The survey “floor” is that a farmer must earn at least $100,000 gross per year from agriculture – the Index does not want to take into account hobby farming.

“We just wanted to be surveying large agriculture,” Dwyer said.
She said DTN staff has been “kicking around” the idea for an ag index for years. They put together focus groups to craft their questions and took the first survey’s recent results back to some of those farmers to get their reaction. She said they generally agreed with the results.

“What we’re really looking forward to is being able to continue this progress,” she said of the surveys, adding that with more time, the accumulated data will become “richer.”

The next Index release date is scheduled for Sept. 20, using this month’s value as its benchmark, to accurately compare any change in sentiment during the next five months. To view the results and learn more about the Index, visit and navigate www.dtn.com/go/ag_confidence

4/28/2010