The October Rural Mainstreet Index by Creighton University fell to its lowest level since April of 2009. The monthly survey fell below the neutral growth mark for the 14th straight month as bankers report one in five grain farmers are experiencing negative cash flows. The index, which ranges between 0 and 100, fell to 31.8 from September’s 37.3. Survey organizer Ernie Goss says lower grain prices and a 19 percent drop in livestock prices over the last 12 months have contributed to the drop. Also tracked by the survey, the farmland and ranchland-price index for October fell to 25.0 from September’s 40.3. This is the 35th straight month the index has landed below growth neutral of 50.0. Finally, the October farm equipment-sales index sank to 13.1 from September’s 14.3. The overall Rural Mainstreet Index represents a snapshot of the rural economy of 10 agriculture-dependent states in the Midwest.
From the National Association of Farm Broadcasting news service.
From: Creighton University
The Creighton University Rural Mainstreet Index sank for October and remained below growth neutral for the 14th 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 fell to 31.8 from September’s 37.3. This month’s reading is the lowest recorded since April 2009.
“Over the past 12 months, livestock commodity prices have tumbled by 19.7 percent and grain commodity prices have slumped by 18.5 percent. The economic fallout from this price weakness continues to push growth into negative territory for six of ten states in the region,” said Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.
Jon Schmaderer, president of Tri-County Bank in Stuart, Nebraska said, “The calf market has now officially followed suit with grain and other livestock pricing declines.” Another bank CEO reported calf prices are going to be down 30 to 40 percent, which will have a large downward economic impact.
Bank CEOs project that more than one in five grain farmers, or 21.6 percent, will suffer negative cash flows for 2016. “This is 2.0 percent higher than the July 2016 projection when the same question was asked,” said Goss.
Farming and ranching: The farmland and ranchland-price index for October fell to 25.0 from September’s 40.3. This is the 35th straight month the index has languished below growth neutral 50.0.
The October farm equipment-sales index sank to 13.1 from September’s 14.3. “Weakness in farm income and low agricultural commodity prices continue to restrain the sale of agriculture equipment across the region. This is having a significant and negative impact on both farm equipment dealers and agricultural equipment manufacturers across the region,” said Goss.
Banking: Borrowing by farmers remains strong as the October loan-volume index slipped to a strong 71.6 from last month’s 72.1. The checking-deposit index climbed to 63.7 from 50.0 in September, while the index for certificates of deposit and other savings instruments fell to 40.9 from 51.5 in September.
This month bankers were asked to identify the biggest challenge to their banking operations. More than one of four, or 27.3 percent, identified rising regulatory costs as their greatest challenge over the next five years. Almost one in 10, or 9.1 percent, reported farm foreclosures as the greatest economic challenge to their banking operations over a five-year time horizon.