Drought, Grain Prices Intensify Stress on Mainstreet

Creighton University’s Rural Mainstreet Index for July experienced its largest one-month decline in nearly nine years.

The index, which ranges between 0 and 100, tumbled to 40.7. It was 50 in June, which is growth neutral.

“This is the largest one-month decline we have recorded since November 2008, or in the middle of the national recession,” said Ernie Goss, an economist and professor at Creighton University. “Drought conditions in portions of the region, combined with weak grain prices, negatively affected economic conditions, and the economic outlook for a large share of bank CEOs this month.”

The July farm equipment-sales index fell to 20.0 from 26.2 in June. This marks the 47th consecutive month the reading has dropped below growth neutral.

In this survey, and in July 2016, bank CEOs were asked to project the percentage of grain farmers likely to experience negative cash flows for 2017. On average, bankers expect 15.1 percent of grain farmers to suffer negative cash flows for 2017. This is an improvement from last year when 19.1 percent anticipated negative cash flows for the year.   

July’s confidence index, which reflects expectations for the economy in six months, fell to 38.4 from 48.9.  

Each month, bank presidents and CEOs in small towns economically dependent upon agriculture and energy are surveyed regarding current economic conditions in their communities and their projected economic outlooks six months down the road. Participants represent Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming. Every state saw a decline in its overall index in July.