Rural Mainstreet Economy Is Negative For Sixth Straight Month
For a sixth straight month, the overall Rural Mainstreet Index (RMI) sank below growth neutral, according to the February survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.
Overall: The region’s overall reading for February fell to 46.2 from 48.1 in January. The index ranges between 0 and 100, with a reading of 50.0 representing growth neutral.
“Higher interest rates, weaker agriculture commodity prices and a credit squeeze are having a significant and negative impact on Rural Mainstreet businesses and on Rural Mainstreet farmers,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.
Jeff Bonnett, CEO of Havana National Bank in Havana, Ill., reported that, “Commodity prices that are $1.50 to $2.00 per bushel (corn) less than break-even are obviously not sustainable.”
Farming and ranching land prices: The region’s farmland price index fell to a still solid 57.7 from January’s 64.0. The farmland price index has remained above growth neutral for 51 consecutive months. “Creighton’s survey continues to point to solid, but slowing, growth in farmland prices. Approximately 19.2% of bankers reported that farmland prices expanded from January levels,” said Goss.
Almost three-fourths of bank CEOs named low farm commodity prices as the biggest risk for farms in 2024.
According to trade data from the International Trade Association, regional exports of agricultural goods and livestock for 2023 were $12.1 billion, which was down 8.7% from $13.3 billion in 2022.
Approximately 44% of bankers indicated that the financial positions of farmers in their area had weakened over the past six months.
Farm equipment sales: The farm equipment sales index for February increased to a still weak 49.5 from January’s 47.9. “This is the eighth time in the past nine months that the index has fallen below growth neutral. Higher borrowing costs, tighter credit conditions and weaker grain prices are having a negative impact on the purchases of farm equipment,” said Goss.
Jim Eckert, CEO of Anchor State Bank in Anchor, Ill., said, “Our farmers are not projecting very profitable operations in 2024. Although some input costs are down from last year, weak grain prices for the 2024 crop are depressed and expected to remain so.”
Banking: The February loan volume index declined to a still strong 66.0 from 71.9 in January. The checking deposit index plummeted to 48.0 from January’s 62.0. The index for certificates of deposits and other savings instruments slipped to a still strong 60.0 from 62.0 in January.
More than four of 10 bankers indicated falling farm commodity prices as the biggest risk for community banks in 2024.
Hiring: The new hiring index for February sank to 49.0 from January’s growth neutral, 50.0. “Approximately 78% of bankers reported no change in hiring from January’s hiring activity,” said Goss.
Confidence: Rural bankers remain very pessimistic about economic growth for their area over the next six months. The February confidence index increased to 40.4 from January’s 38.5. Weak and falling agriculture commodity prices and higher interest rates over the past several months continued to constrain banker confidence.
Home and retail sales: Both home sales and retail sales sank below growth neutral for the last four months. The February home-sales index slumped to 35.4 from 38.0 in January. “Elevated mortgage rates and a limited supply of homes are sinking the home sales index below growth neutral in rural areas,” said Goss.
The retail-sales index for February fell to 44.0 from 46.0 in January. “High consumer debt and elevated interest rates are cutting into retail sales on the Rural Mainstreet Economy,” said Goss.
The survey represents an early snapshot of the economy of rural agriculturally- and energy-dependent portions of the nation. The Rural Mainstreet Index is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. The index provides the most current real-time analysis of the rural economy. Goss and Bill McQuillan, former Chairman of the Independent Community Banks of America, created the monthly economic survey and launched it in January 2006.
Source: Creighton.Edu