When farmers are making money, they tend to spend it on better farm equipment. With grain prices higher and the biofuels business booming, the outlook is bright for farm machinery sales in 2007.

According to a Reuters report, sales of farm equipment were disappointing last year despite the higher corn prices, but one industry analyst expects that to turn around this year.

“Before when you had a spike in corn prices, it was a function of supply. Your corn prices went higher but you had less corn to sell,” said Credit Suisse industrial machinery analyst Jamie Cook, citing the last time U.S. corn prices were at current levels after the drought of 1996.

“This time it’s different in that demand is driving the corn prices higher so we have higher prices, more corn, which means more money in the farmer’s pocket,” she said