Rural Mainstreet Index Weakens, Corn Prices Below Breakeven

The Rural Mainstreet economy moved above the 50.0 threshold for five straight months, according to the July survey of bank CEOs in a 10-state area. However, the index has been trending lower since June 2013 when the reading stood at 60.5.

Overall, The Rural Mainstreet Index (RMI), which ranges between 0 and 100, with 50.0 representing growth neutral, fell to 51.8 from June’s 53.6.

“Agriculture commodity prices have plummeted for farmers in our region. The drop has slowed growth in the region… with prices below breakeven for a significant share of agriculture producers,” said Ernie Goss, Ph.D., the Regional Economics Chair at Creighton University’s Heider College of Business. “I expect readings to move even lower as these lower prices spill over into the broader economy,” Goss added.

The farmland and ranchland price index for July slumped to 48.3, and the farm-equipment sales index dipped to 33.4. The index has been below growth neutral for 13 straight months. “Farmers have certainly become more cautious in their purchase of both additional land and equipment. This is having a negative impact on implement dealers across the region,” said Goss.

According to bankers, current crop prices, including corn, are close to or below the breakeven price for farmers. More than 40% of bankers expect loan defaults to climb in the year ahead if crop prices remain at current levels. However, previous strong farm economic conditions are expected to soften the impact of current low prices, and other bankers look for farmers improved financial sophistication to soften the blow of lower prices.

In addition, in July bankers reported, on average, a 7.1% increase in agriculture lending over the past year and anticipate that lending will continue to expand as a result of low crop commodity prices. S