CHS sees U.S. farm incomes rising in 2010
CHICAGO (Reuters) - U.S. farm incomes will increase in 2010 and 2011 even if the broader economy remains mired in a recession due to forecasts for corn and soybean prices to rise, said a top executive with the largest U.S. farmer cooperative, CHS Inc (CHSCP.O).
"The attitude when we're talking with our farmers and our customers is really 2009 is kind of a recalibration year where the whole goal here is just get through here and not make any major mistakes and then come out of this in 2010 and look for better revenue per acre," said Chief Operating Officer Mark Palmquist at the Reuters Food and Agriculture Summit in Chicago on Tuesday.
After two years of record net farm income, producers will see their earnings fall about 20 percent in 2009, according to a government forecast. Still, net farm income would remain 9 percent above the 10-year average.
"I still think the rural economy is not only going to be profitable but making fairly good money for the year," Palmquist said.
U.S. farm incomes soared in recent years as prices for wheat, corn and soybeans steadily increased and hit record highs in 2008. At the same time, the value of farm land skyrocketed and has held fairly steady despite overall real estate values falling about 20 percent.
Many farmers and grain companies used their higher incomes to pay down debt or invest in equipment to allow them to run their businesses more efficiently.
"For the country elevators we track, their debt-equity (ratio) that they have right now is at a level that you would have to go back decades to find," Palmquist said. "They're in about as healthy a situation as they can be from a balance-sheet perspective."
CHS, based in Inver Grove Heights, Minnesota, markets grain for farmers, processes products for food manufacturers and produces fuels and lubricants under the Cenex brand name.
Prospects for a reduction in corn seedings plus the potential for a pickup in corn usage are leading analysts to project Chicago Board of Trade corn futures to stay strong this season.
Spot CBOT corn prices have risen nearly 14 percent in the past two weeks and are nearing $4 per bushel. Soybean prices are up nearly 6 percent at more than $9 per bushel.
"We keep adding mouths to feed," Palmquist said. "As long as you don't have another collapse in some of the major economies like China or India, we will see continued demand growing in those areas."
(Reporting by Lisa Shumaker, editing by Matthew Lewis)
