Rural Economy Index Lower Again

The Creighton University Rural Mainstreet Index remained weak with a reading below growth neutral for the 20th straight month, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and energy. Released last week, the index which ranges between 0 and 100, slipped to 44.6 from 45.3 in March. The last time the overall index was at or above growth neutral was August 2015. The farmland and ranchland-price index for April slumped to a frail 30.7 from March’s 33.0. This is the 41st straight month the index has languished below growth neutral. Meanwhile, the April farm equipment-sales index sank to a very weak 21.5 from 22.0 in February, the 44th consecutive month the reading has fallen below growth neutral. Borrowing by farmers soared for April as the loan-volume index advanced to a record 81.6 from last month’s 58.4. And, the confidence index, which reflects expectations for the economy six months out, slipped to 45.6 from 47.5 in March indicating a continued pessimistic outlook among bankers.

From the National Association of Farm Broadcasting news service.

From: Creighton University Rural Mainstreet Index

Rural Mainstreet Sinks for the Month:
Farm Loans Rise to Record Level

April Survey Results at a Glance:

* The overall index fell below growth neutral for the 20th straight month.
* Loan volume soars to record level as banks reject fewer loan applications.
* Almost one-third of bankers indicate no change in lending practices stemming from the downturn in the farm economy.
* For 2017, bank CEOs expect approximate cash expenses to exceed cash revenues for 17.1 percent of grain farmers, down from 19.5 percent in 2016.
* Farmland prices declined for the 41st straight month, but the percent of cash farmland sales remained steady from 2015.

OMAHA, Neb. (April 20, 2017) – The Creighton University Rural Mainstreet Index remained weak with a reading below growth neutral for the 20th straight month, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

Overall: The index, which ranges between 0 and 100, slipped to 44.6 from 45.3 in March. The last time the overall index was at or above growth neutral was August 2015.

“Weak farm commodity prices continue to squeeze Rural Mainstreet economies. Over the last 12 months, livestock commodity prices have tumbled by 5.8 percent and grain commodity prices have slumped by 4.5 percent. The U.S. Department of Agriculture is estimating 2017 will mark the fourth consecutive year that farm income has declined. This downward trend has pushed our survey results into negative territory,” said Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

Farming and ranching: The farmland and ranchland-price index for April slumped to a frail 30.7 from March’s 33.0. This is the 41st straight month the index has languished below growth neutral 50.0.

According to Pete Haddeland, CEO of the First National Bank in Mahnomen, Minnesota, “We are seeing a lot of farm auction sales the last 6 months. Both retirement and getting out of farming.

”The April farm equipment-sales index sank to a very weak 21.5 from 22.0 in February. This marks the 44th consecutive month the reading has fallen below growth neutral 50.0.

Banking: Borrowing by farmers soared for April as the loan-volume index advanced to a record 81.6 from last month’s 58.4. The checking-deposit index slumped to 52.2 from 56.0 in March while the index for certificates of deposit and other savings instruments declined to 44.5 from 47.6 in March.

According to Jim Eckert, president of Anchor State Bank in Anchor, Illinois, “We feel that all our farmers have sufficient equity and determination to survive the current downturn in the farm economy.”

Bank reactions to falling farm income since 2013 have been mixed according to Creighton’s April survey. While the percent of bank rejecting loan applications was a high 30.6 percent, this is down from 35.3 percent recorded last year. Furthermore, almost one-third, or 30.2 percent of bank CEOs, reported no change in lending stemming from weak farm income.Hiring: The job gauge dipped to 57.8 from March’s 59.6. Rural Mainstreet businesses not linked to agriculture increased hiring for the month at a solid pace.

Confidence: The confidence index, which reflects expectations for the economy six months out, slipped to 45.6 from 47.5 in March indicating a continued pessimistic outlook among bankers. “Until agricultural commodity prices begin to trend higher, I expect banker’s economic outlook to remain weak,” said Goss.

Read the full report.