Index Shows AG Companies Fare Well In Hard Economy

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Prices for corn, soybeans and other crops have been soaring.
Prices for corn, soybeans and other crops have been soaring.

by David Mercer

CHAMPAIGN, Ill. (AP) -Since 2007, much of the American economy has stumbled through a difficult period, but agriculture-related firms have enjoyed four profitable years thanks to heavy demand for corn and other crops.

A new index of 21 agriculture-related companies, called Agindex, shows their market value increased 8.6 percent a year from the beginning of 2007 through the end of March 2011. During that same period the value of companies in the S&P 500 dropped on average 2.7 percent per year.

Gary Schnitkey, a University of Illinois agricultural economist, created the index with graduate student Clay Kramer to measure the strength of the agricultural sector. What they found was evidence of the strength of the rural economy the past few years, when crop prices sheltered farm country from much of the worst of the recession.

"Farmers are buying equipment and everything so it does filter out into the general rural sector," Schnitkey said. "The rural economy did fare pretty well."

"You're going to see pretty high (farmer) incomes for this year and probably next year," he said. "It's hard to see a situation where that moderates a lot."

Prices for corn, soybeans and other crops have soared for several reasons, including a surge in overseas purchases from developing economies in China and India as well as continued demand from U.S. livestock and ethanol producers.

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