Rural Mainstreet Economy Expanding: Federal Reserve Rate Remains a Challenge
“The farm equipment-sales index fell to a weak 48.3 from 50.2 in May. Farm equipment sales declined for only the third time in the past 31 months.”
After declining below growth neutral for March, the overall Rural Mainstreet Index for June expanded above the threshold for a third straight month to its highest level since May 2022, according to the June monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.
June 2023 Survey Results at a Glance:
- June’s overall reading, the Rural Mainstreet Index (RMI), rose above growth neutral for the month to its highest level since May 2022.
- Bank CEOs ranked Federal Reserve rate hikes as the greatest challenge in the 12 months ahead with rising bank regulations a distant second.
- More than half of bankers reported that higher interest rates were impairing farm equipment purchases.
- Farm equipment sales declined for only the third time in the past 31 months.
- On average, bankers expect farm loan defaults to expand less than 1% over the next 12 months.
- The region exported $13.3 billion of agriculture and livestock in 2022. This represented 26.5% growth from the previous year. Mexico was the chief destination, accounting for 55.2% of the region’s farm exports.
Farm equipment sales: The farm equipment-sales index fell to a weak 48.3 from 50.2 in May. Farm equipment sales declined for only the third time in the past 31 months. “Higher borrowing costs have begun to negatively impact purchases of farm equipment,” said Goss.
Farming and ranching land prices: The region’s farmland price index rose to 59.3 in June from 56.3 in May. This was the 33rd straight month that the index has advanced above 50.0.
Overall: The region’s overall reading in June climbed to 56.9, the highest reading since May 2022 and up from last month’s 55.8. The index ranges between 0 and 100, with a reading of 50.0 representing growth neutral.
More than half of bankers reported that higher interest rates were impairing farm equipment purchases.