Rural Mainstreet Index Improving

Dan Economy, Industry News Release

Rural Mainstreet Climbs to Highest Level Since September 2015:
But Only 15 Percent Report Expanding Economy

February Survey Results at a Glance:
rural mainstreet
* The overall index, while remaining below growth neutral, rose to its highest level since September 2015.
* More than one-third of bank CEOs reported their local economy remains in an economic downturn.  Only 14.9 percent of bankers indicated their local economy was expanding.
* On average, farmland prices have declined by 5.1 percent over the past 12 months.
* Approximately 73.9 percent of bankers expect agriculture- equipment sales to continue to decline in their area over the next year.

The Creighton University Rural Mainstreet Index remained weak with a reading below growth neutral for the 18th 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 advanced to 45.8 from 42.8 in January. This is the highest overall index since September 2015.

“Weak farm commodity prices continue to squeeze Rural Mainstreet economies. However, the negatives are getting less negative. Over the past 12 months, livestock commodity prices have tumbled by 9.4 percent and grain commodity prices have slumped by 6.3 percent, both an improvement over last month,” said Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University’sHeider College of Business.

Only 14.9 percent of bankers reported that their local economy was expanding. Approximately 34 percent indicated their local economy was in a recession with the remaining 51.1 percent indicating little or no economic growth.

According to Todd Douglas, CEO of the First National Bank in Pierre, South Dakota, “What we see in the agriculture industry is that farmers hurt the worst are those who farm small grain crops exclusively.” Douglas indicated operators that diversify in cattle, cattle feeding, hogs and other like type lines, are maintaining, or at least not experiencing as large a drop in net worth.

Farming and ranching: The farmland and ranchland-price index for February dipped to a frail 33.7 from January’s 33.8. This is the 39th straight month the index has languished below growth neutral 50.0.

Bankers indicated that farmland prices in their area had declined by an average of 5.1 percent across the region over the past 12 months.

But there was a great deal of variation across the region.  Pete Haddeland, CEO First National Bank in Mahnomen, Minnesota, for example, reported, “Land values are holding up here. We did not see the big prices increases.” He also indicated that farmers harvested great crops last year.

The February farm equipment-sales index increased to 20.5 from 16.7 in January.

Almost three-fourths of the bankers expect agriculture equipment sales to continue to decline over the next 12 months. Only 4.3 percent expect agriculture equipment sales to increase over the same period of time.

Banking: Borrowing by farmers remained above growth neutral for February, but is growing at a much slower pace than for January as the loan-volume index fell to 50.1 from last month’s 52.4. The checking-deposit index slipped to 68.1 from 71.9 in January, while the index for certificates of deposit and other savings instruments increased to 46.8 from 43.9 in January.

Despite weaker farm income, defaults remain relatively low. As stated by Don Reynolds, CEO of  Regional Missouri Bank in Marceline, Missouri, “We are pleased that most of our farm customers have been able to meet payment obligations this year.”

Hiring: The job gauge rose to 54.3 from January’s 52.5. For the region, Rural Mainstreet employment is down by 0.6 percent over the past 12 months. Over the same period of time, urban employment for the region expanded by 1.2 percent.

Confidence: The confidence index, which reflects expectations for the economy six months out, improved to a weak 45.7 from 42.7 in January 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.

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