Strong farm economy rolls alongby Mark Steil, Minnesota Public Radio
Worthington, Minn. — The nation's struggling economy is making tentative steps toward recovery, but it still has quite a ways to go to catch the high-flying agricultural sector.
The Great Recession barely touched the agricultural economy because of high commodity prices. Grain and livestock prices remain high and farm income is likely to set another record this year. Those good times on the land are spreading to businesses that sell to farmers.
Farm machinery makers are one of the main beneficiaries of the strong agricultural economy. Equipment demand is so robust that some companies are expanding, adding more production and jobs.
One of those companies, AGCO, is enlarging its manufacturing plant in the southwest Minnesota community of Jackson. Just this month the first tractor rolled off a new production line. To mark the event, plant manager Eric Fisher climbed on board the bright red machine and spoke to the more than 100 workers who made it.
"This is the first Massey Ferguson tractor that's been built in America in quite a long time," Fisher said. "Give yourselves a hand."
Fisher said AGCO's decision to move some Massey Ferguson production back to the United States from Europe means 200 new jobs at the Jackson plant.
AGCO has seen strong sales recently, up nearly 30 percent over the same period a year ago. Fisher said those gains are a direct reflection of the good times farmers are seeing.
"The ag industry has been very strong," he said. "That definitely helps."
It helps a lot of companies because spending by farmers is broad based. According to the U.S. Commerce Department, shipments of farm equipment are running about 20 percent ahead of this time last year. Sales of agricultural chemicals, fertilizers and pesticides are up nearly 30 percent. New machine sheds and grain bins dot the landscape.
Farmers are buying more acreage, bidding up land prices. They're also improving their fields.
James Duininck, vice president of Prinsco, a Willmar company that makes farmland drainage pipe, said the company has seen strong sales in the last year, one of its best in the last 10 years.
Duininck said improved drainage systems have prevented heavy rains from drowning out crops, yielding more bushels and profit per acre. He said farmers are using some of their record earnings to fix the trouble spots on their land.
That means Prinsco can sell more drainage pipe.
"A lot of new farm drainage equipment has been sold to either landowners or farm drainage contractors," Duininck said.
All that new drainage likely will not please members of environmental groups because they'll argue it means more water and soil will wash into the region's already silt-loaded rivers. But it is good news for companies like Prinsco.
Duininck said strong demand led the company to open a new drainage pipe manufacturing plant in South Dakota and to plan another new facility for the Fargo-Moorhead area. The two expansions will create about 40 new jobs.
Although the agricultural boom supporting such new positions is one of the strongest most farmers have ever seen, many wonder how long it can continue, farm consultant Robert Hill said.
"They see some dark clouds on the horizon and it makes them nervous about the future," Hill said.
Hill said there are signs the farm economy may weaken just a bit. Grain prices are down a fifth from last summer's peak. The troubled European economy could push prices down more. At the same time, supplies are growing more expensive. As a result, farmers likely will pay more next spring for their seed, fertilizer and pesticides.
But that doesn't necessarily mean the good times are over. Profit margins are so robust now it may turn out that farmers can take some bad financial news and still have enough of a cushion to make a profit on their crops and animals.
- Morning Edition, 12/22/2011, 6:20 a.m.