Midwest factories bounce back

  • Article by: SUSAN FEYDER , Star Tribune
  • Updated: April 2, 2012 - 9:12 PM

Agricultural equipment and exports are driving a production surge verified by national and regional manufacturing surveys.

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Many manufacturers that serve the agricultural sector are benefiting from the rebound in the farm economy. John Isaacson of Isaacson Implement in Nerstrand, Minn., described the Massey-Ferguson 8660 tractor to Tom Malecha and Jerry Kalina, both farmers from Northfield, at a trade show last year.

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Exports and production of farm-related equipment kept factories bustling in America's heartland in March.

"Businesses selling internationally continue to lead the regional economy," Prof. Ernie Goss, who oversees Creighton University's manufacturing study, said Monday. "Anything connected to agriculture, anything connected to energy in the manufacturing sector is doing real well."

Creighton's survey of the mid-America region that includes Minnesota saw its index hit its highest level in almost a year, moving up to 58.6 in March compared with 58.4 in February. A reading above 50 indicates growth.

A similar nationwide survey by the Institute for Supply Management (ISM) rose from 52.4 in February to 53.4 in March. The national study registered a strong gain in production that offset a slight decline in new orders.

Both surveys reported strong gains in employment and a scramble by some companies to find qualified workers.

Although the ISM study reported a decline in exports, they posted a healthy increase in the Creighton study.

Farm-related manufacturing has bolstered manufacturing in the mid-America region for more than a year. While the consumer economy still continues to struggle its way out of the recession, weighed down by the depressed housing market, the agricultural economy has proven surprisingly strong.

Rising agricultural income has kept farmers spending. After dropping more than 20 percent in 2009, nationwide retail sales of tractors increased more than 6 percent in 2010 and about 2 percent in 2011, according to the Association of Equipment Manufacturers. For the first two months of this year sales are up almost 7 percent.

The maker of Massey Ferguson tractors recently began production in an expanded plant in Jackson, Minn. Meanwhile, Duluth, Ga.-based AGCO, which makes agricultural equipment under the Massey Ferguson and several other brand names, has added 200 employees in Jackson, bringing the workforce to 1,050, Bob Crain, a senior vice president for AGCO North America said in an interview Monday.

The expansion in Jackson is part of a larger effort to increase production in North America, which currently accounts for about 20 percent of AGCO's sales, Crain said. ACGO has two other production operations in Kansas and one in Mexico.

"We want to send a message that we are dead serious about the North American market," Crain said. Right now a tight labor market is hindering its efforts to boost production in Kansas, he said.

Smaller manufacturers also have reaped the benefits of rising farm income. Sales at Teske Manufacturing, which makes pens and other confinement systems for pork producers, have been up sharply in the last two years, said owner Tom Teske. The Springfield, Minn.,-based company has added 3 employees to its 26-person workforce in the last year.

"Overall we're expecting a similar year in 2012," Teske said.

Environmental Tillage Systems of Faribault saw its sales increase more than 7 percent last year, according to CEO Kevin Born. Sales near the end of the year were helped by farmers eager to take advantage of accelerated depreciation rules which expired in 2011, Born said.

Goss noted that another sign of strengthening in the manufacturing sector was the increased number of companies adding fuel surcharges to the cost of their products. About three-fourths of the Creighton survey respondents said they had added the charges.

"It's a signal of strong demand," Goss said. "If manufacturers weren't seeing that, they'd just absorb the [fuel] costs rather than tack them on."

Susan Feyder • 612-673-1723

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