The Creighton University Rural Mainstreet Index for July fell from June’s weak reading, according to the monthly survey of bank CEOs in rural areas of a 10-state region within the Midwest dependent on agriculture. After improving four of the last five months, the index, which ranges between 0 and 100, sank to 39.8 from 43.9 in June. This is the 11th straight month the overall index has remained below growth neutral. As a result of weaker farm economic conditions, bankers expect almost one in five crop farmers, or 19.5 percent, to suffer negative cash flows where cash expenses exceed cash revenues for 2016. This month, bankers estimated farmland prices have fallen by six percent over the past 12 months. However, there is a great deal of variation across the region in the direction and magnitude of farmland prices.This month, bankers were asked to assess the likelihood of loan defaults in their area. On average, farm loan defaults are expected to rise by 5.4 percent over the next 12 months.
From the National Association of Farm Broadcasting news service.
From: Creighton University
Rural Mainstreet Economy Weakens in July: High Share of Crop Farmers with 2016 Negative Cash Flow
July Survey Results at a Glance:
* For an 11th straight month, the Rural Mainstreet Index fell below growth neutral.
* Farmland prices remained below growth neutral for the 32nd straight month.
* Bank CEOs reported a 6 percent decline in farmland prices over the past year.
* Bankers expect cash expenses will exceed cash revenues for one in five crop farmers in the region.
* Bank CEOs expect farm loan defaults to grow by 5.4 percent over the next year.
The Creighton University Rural Mainstreet Index for July fell from June’s weak reading, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.
Overall: After improving for four of the last five months, the index, which ranges between 0 and 100, sank to 39.8 from 43.9 in June.
This is the 11th straight month the overall index has remained below growth neutral.
“Over the past 12 months, farm prices have fallen by 9 percent, and livestock prices are off by 16 percent. These weak agriculture commodity prices are pushing the overall Rural Mainstreet economy lower,” said Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.
As a result of weaker farm economic conditions, bankers expect almost one in five crop farmers, or 19.5 percent, to suffer negative cash flows where cash expenses exceed cash revenues for 2016.
Farming and ranching: The farmland and ranchland-price index for July slumped to 31.3 from 32.3 in June. This is the 32nd straight month the index has languished below growth neutral 50.0.
This month, bankers estimated, on average, farmland prices have fallen by 6 percent over the past 12 months. However, as in previous months, there is a great deal of variation across the region in the direction and magnitude of farmland prices, with prices growing in some portions of the region.
One bank CEO said, “The cow and calf operators, which dominate our market, are the ones that will feel the affect of the downturn in the market the most.”
The July farm equipment-sales index sank to 10.7 from 12.8 in June. “Weakness in farm income and low agriculture commodity prices continue to restrain the sale of agriculture equipment across the region,” said Goss.