Rising input costs on producers' minds.

As spring fieldwork gets under way and input decisions are finalized, the AgriMarketing/Beck Ag PRODUCER DIALOGUE indicated that increased costs of purchased inputs will be the single most important problem facing their businesses in 2006.

The overall U.S. economy has displayed remarkable resiliency in the face of record high energy prices, rising interest rates, natural disasters (Hurricane Katrina), and the continued war on terrorism. Many economists are anticipating real Gross Domestic Product (GDP) growth in the 3 percent to 4 percent range for 2006, on par with the 2005 rate.

Producers agree. Fifty-seven percent indicate growth in the U.S. economy will continue to increase within the 3 percent to 4 percent range, while 30 percent believe it will weaken and 13 percent believe it will increase more than 3 percent to four percent.

Turning to the agricultural sector, corn and soybean prices are expected to come under pressure due to rising stocks of corn and soybeans at the end of the 2005-2006 marketing year. Yet future grain prices have remained relatively strong due to weather concerns and hedge fund investments in commodities.

Fifty-five percent of the producers believe that grain prices will remain unchanged, 26 percent believe prices will decline, and 19 percent believe prices will improve.

Given the level of uncertainty, producers remain committed to agriculture. Seven out of 10 producers plan to maintain their current capital expenditures, and two out of 10 will increase their expenditures in the upcoming year.

Farm income prospects are less optimistic than commodity prices. Four out of 10 producers believe their gross farm income will either remain the same or decline, while only two out of 10 believe their income will decrease. Those that believe their income will increase are likely the same producers that will increase their investment.

LONG-TERM OUTLOOK, AND A MAJOR HURDLE

Producers remain positive about the future of the agricultural industry, with two out of three producers being somewhat or very positive about agriculture's long-term outlook.

However, escalating energy prices during late 2005 and into 2006 have had a significant negative impact on the outlook of the agricultural economy. Increased fuel and fertilizer prices will likely result in many changes in production and marketing decisions.

That pessimism is reflected by the dialogue participants. A full seven out of 10 producers listed inflation as their most important business problem.

To request the complete report on the AgriMarketing/Beck Ag PRODUCER DIALOGUE or to suggest special questions for the future, please contact Keith Nicholson at [e-mail].

IN THE NEXT TWELVE MONTHS DO YOU EXPECT
OVERALL U.S. ECONOMIC CONDITIONS TO:

Weaken                          30%
Increase more Than 3-4%         13%
Increase by 3-4%               57%

Note: Table made from pie chart.