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Editor's note: This is the next installment in the "Producer Dialogue" series which measures the pulse of U.S. agricultural producers.

Burgeoning demand for alternative fuels has corn and soybean growers looking forward to a profitable 2007, according to the AgriMarketing/Beck Ag Producer Dialogue. More than two out of three growers expect gross farm income to increase or stay the same in 2007.

On the other hand, one industry's nectar can be another's poison, as higher feed costs have beef producers less optimistic about their businesses this year. Of those participating in the panel, 42% said gross farm income would decline in '07 due mostly to higher input costs, including feed and fuel.

While grain and fuel prices will impact the 2007 agriculture outlook, interest rates will have the biggest impact on the growth of the general economy. U.S. economic growth has slowed in response to higher interest rates, although many economists believe the Federal Reserve has completed its tightening and will stabilize interest rates, or even drop them, in the second half of 2007. Overall growth in 2007 is expected to be near 2.5%, nearly a point lower than 2006.

A greater percentage of producers agree that the general economy will "get worse" (36%) rather than improve (16%) in 2007. This attitude does not transfer to their outlook for agriculture, however, as 67% of beef producers and 75% of our corn/soybean growers are positive about the long-term outlook.

Escalating input prices, including feed and fuel, remain the most important problem facing producers and growers — 70% rated this issue as most important. Corn and soybean growers rate prices of the products they produced as the second most important issue, while beef producers say government regulations and controls are second in importance.

Regardless of input prices or a slow economy, optimism in agriculture will reinforce investment. Seven out of ten respondents will maintain their investments in livestock, equipment, buildings and land, while 20% will increase their investment.

With the ramp up of the biofuels industry, corn and soybean producers are more optimistic about market demand for their products (see Fig. 2). Over one-third reported they think their markets will improve, a 30% increase over the prior year. Because of export challenges in Asia, beef producers were somewhat less optimistic.

The AgriMarketing/Beck Ag Producer Dialogue survey evaluates agricultural input supply industries from the producer point of view. The panel was initiated to guide agri-marketers on the trends, issues and changes that are being implemented or anticipated by rural America.

This latest survey consisted of 42 corn and soybean growers and 76 beef producers. Corn and soybean grower's operations averaged 2,465 acres, while the beef producer's averaged 1,245 head.

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