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Food, Agriculture CFOs Optimistic About 2011

NORWALK, Conn. Chief financial officers at U.S. companies believe that the worst of the global economic crisis is over, and that their industries will enjoy moderate growth next year, according to a recent survey of CFOs by GE Capital here. In the survey of 530 CFOs at companies with revenues ranging from $50 million to $1 billion, 47% said they expect the U.S. economy to be stable in the months ahead,

NORWALK, Conn. — Chief financial officers at U.S. companies believe that the worst of the global economic crisis is over, and that their industries will enjoy moderate growth next year, according to a recent survey of CFOs by GE Capital here.

In the survey of 530 CFOs at companies with revenues ranging from $50 million to $1 billion, 47% said they expect the U.S. economy to be stable in the months ahead, while 37% said they expect to see improvement soon. Sixty-two percent said they had begun hiring new or replacement staff in 2010, and 56% said they expect to continue adding new jobs in the near term. And, CFOs who said their companies would be hiring expected their workforces to increase by an average of 7%.

CFOs in the food, beverage and agriculture sector were the most optimistic about their industry's prospects, followed by CFOs in technology, metals, health care and retail sectors. However, while survey respondents expressed optimism about their own businesses, they continued to express concern about the broader business environment and the health of the U.S. economy.

Despite their relatively sunny outlook, only 48% of food industry CFOs said they expect to see revenue growth in the coming months. This combination of optimism and lowered expectations could reflect a belief that the recession has entrenched many U.S. consumers in value-focused shopping habits.

“I think that's a shift that we've seen throughout the retail sector,” noted Dennis Krause, industry leader of food, beverage and agribusiness for GE Capital. “Brands still certainly matter, but this recession has created an incredible value shopper. They're looking for quality and lower price, and they're finding both in private label.”

Food industry executives may also be coming to grips with the fact that commodity prices may remain high.

“Food companies are adjusting to $5 corn as a new reality. They've readjusted their expectations for what commodity costs are going to be,” Krause said, noting that few analysts expect corn to return to its inflation-adjusted historical average of about $2.50 per bushel anytime soon. Growing demand for animal feed in emerging markets around the globe, among other trends, may have set a higher floor for the cost of corn, soybeans and other key commodities.