Because farmers in the western U.S. are expected to fare better in the current economic climate, dealers in the West should also benefit, according to a survey by Rabobank N.A., a major ag lender.

Overall, the study found that U.S. farmers' intentions to purchase equipment are on par with 2008.

The study indicates that the average farm income is highest in the West compared with other regions and western farmers and ranchers may get through the recession better than their counterparts in other parts of the nation,

"While farmers' outlook on the economy generally mirrors that of the overall population, our survey shows that farmers in the West may be better positioned to handle the economy," says Bob Dingler, senior vice president and managing director of agriculture for Rabobank, a unit of the Rabobank Group of The Netherlands.

"As the state with the highest total value of ag products sold, California farmers and ranchers have learned how to manage their risk," Dingler says.

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.

However, deployment of risk management strategies varies based on the degree of concern about the U.S. agricultural economy. While 45% of farmers who are concerned about the agricultural 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 are not concerned.

"Like farmers and ranchers in other areas of the United States, this survey illustrates that those in Western states are taking steps to mitigate their risk in order to navigate this difficult economic environment," says Charles McElligott, managing director and senior vice president of the western region for Rabo AgriFinance.

While revenue is declining for many farmers, the cost of inputs is improving, the survey says. 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.

Farmers and ranchers surveyed in Western states are less optimistic with 42% believing that input costs will worsen in the future. However, that number is lower than the 2008 survey when 68% of those surveyed believed costs would increase.

In looking ahead, nearly half of those surveyed expect the agricultural economy to worsen in 2010, and most are currently concerned about the economy. Nearly nine out of 10 farmers are concerned about their own economic situation, and nearly eight out of 10 say they would have been more optimistic if current economic conditions had been better, according to the survey.

However, three out 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 that their responses would have been more favorable about the future compared with those who do not (72%). This survey finding suggests that the current economic condition is driving the adoption of risk management solutions.

For farmers in the West, more than half of those surveyed believe the economy will be worse in the next 12 months.

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 do not 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%).

Nearly three quarters of farmers and ranchers in the West are not planning to purchase farm equipment.

Source: Ag Equipment Intelligence