Mainstreet Economy

Rural Mainstreet Economic Index Cools for May: Cash Rents Climbed by Almost 10% over the Past 12 Months

May Survey Results at a Glance:

  • The overall index fell to its lowest level since February 2021 but remained above growth neutral for the 18th straight month.
  • Escalating costs of farm inputs pushed borrowing up to its highest reading since May 2020.
  • On average, cash rents have risen by 9.6% to $250 per acre for non-irrigated crop land over the past 12 months.
  • Approximately 40% of bankers expect 2022 farm income to be greater than 2021 farm income, while 25.9% of bankers expect 2022 farm income to be less than last year’s farm income.
  • The depreciation of the U.S. dollar against the Mexican peso has been a stimulus to exports to Mexico, the top destination for the region’s farm products.

OMAHA, Neb. (May 19, 2022) — The Creighton University Rural Mainstreet Index (RMI) fell from April’s healthy reading and remained above growth neutral for the 18th 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 region’s overall reading for May declined to 57.7, its lowest level since February 2021 and down from April’s 62.0. The index ranges between 0 and 100 with a reading of 50.0 representing growth neutral.

“Much like the nation, the growth in the Rural Mainstreet economy is slowing. Supply chain disruptions from transportation bottlenecks and labor shortages continue to constrain growth. Farmers and bankers are bracing for escalating interest rates — both long-term and short-term,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

Farming and Ranching: The region’s farmland price index for May sank to a still strong 72.0 from 80.0 in April, marking the 20th straight month that the index has moved above growth neutral. Over the past several months, the Creighton survey has registered the most consistent and strongest growth in farmland prices since the survey was launched in 2006.

On average, cash rents have risen by 9.6% to $250 per acre for non-irrigated crop land over the past 12 months, according to bankers.

In 2021, the 10-state region exported $10.6 billion of farm commodities, including livestock. Approximately 57.2% of those exports went to Mexico. Despite the rapid rise in the dollar against most currencies, the dollar has depreciated by almost 17% against the Mexican peso. This has made Rural Mainstreet agriculture products more competitively priced in Mexico.

Jim Eckert, president of Anchor State Bank in Anchor, Illinois, reported that “wet weather has our area farmers way behind, but it's been a bit drier the last week or so. Some soybeans and almost no corn have been planted so far.”

Farming and ranching: The region’s farmland price index for April climbed to a strong 80.0 from 78.0 in March, marking the 19th straight month that the index has moved above growth neutral. Over the past several months, the Creighton survey has registered the most consistent and strongest growth in farmland prices since the survey was launched in 2006.

Farm equipment sales: The May farm equipment-sales index declined to 66.9 from April’s 67.6. This was the 18th straight month that the index has advanced above growth neutral. Readings over the past several months are the strongest string of monthly readings recorded since the beginning of the survey in 2006.

Banking: The May loan volume index soared to 73.0 from April’s 51.9. The checking-deposit index slumped to 54.0 from April’s 66.0, while the index for certificates of deposit and other savings instruments increased to 40.4 from 39.1 in April. “Escalating costs of farm inputs pushed borrowing up to its highest reading since May 2020,” said Goss.

More than one of ten bankers expect the Federal Reserve to raise rates by 0.75% (75 basis points) at its June meetings. Approximately 70% of bankers anticipate a 0.50% (50 basis points) rate hike at that Fed meeting.

Hiring: The new hiring index dipped to 61.5 from 64.0 in April. Labor shortages continue to be a significant issue constraining growth for Rural Mainstreet businesses.

Confidence: Russia’s invasion of Ukraine, along with accompanying global trade tensions and surging inflation, constrained the business confidence index to 40.4, which was up from 39.1, its lowest level since the beginning of the pandemic in Spring 2020. This marks the lowest back-to-back readings since the beginning of the pandemic in April and May of 2020.

Home and retail sales: The home-sales index dropped to a healthy 61.5 from April’s 70.0. The retail-sales index for May decreased to growth-neutral 50.0 from April’s 54.0. “Healthy farm commodity prices accompanying strong farm income continue to have positive impacts on Rural Mainstreet retail sales and home sales,” 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. It 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.

Below are the state reports:

Colorado: Colorado’s Rural Mainstreet Index for May fell to 72.8 from April’s 76.0. The farmland- and ranchland-price index dropped to 79.5 from 81.5 in April. Colorado’s hiring index for May declined to 70.4 from April’s 72.7. “For 2021, the Colorado export of farm commodities to Mexico represented 47.8% of all farm commodity exports. The depreciation of the dollar to the peso was very supportive of these exports in 2021,” said Goss.

Illinois: The May RMI for Illinois sank to 68.9 from 72.1 in April. The farmland-price index moved down to 78.1 from 85.7 in April. The state’s new-hiring index decreased to 68.5 from April’s 70.8. “For 2021, the Illinois export of farm commodities to Mexico represented 38.3% of all farm commodity exports. The depreciation of the dollar to the peso was very supportive of these exports in 2021,” said Goss.

Iowa: The May RMI for Iowa rose to 56.7 from 53.4 in April. Iowa’s farmland-price index declined to 71.0 from April’s 78.5. Iowa’s new-hiring index for May climbed to 69.8 from 62.1 in April. “For 2021, the Iowa export of farm commodities to Mexico represented 61.5% of all farm commodity exports. The depreciation of the dollar to the peso was very supportive of these exports in 2021,” said Goss.

Kansas: The Kansas RMI for May increased to 54.4 from April’s regional-low 49.0. The state’s farmland-price index fell to 69.4 from April’s 77.0. The new-hiring index for Kansas dropped to 57.8 from 60.1 in April. “For 2021, the Kansas export of farm commodities to Mexico represented 63.0% of all farm commodity exports. The depreciation of the dollar to the peso was very supportive of these exports in 2021,” said Goss.

Minnesota: The May RMI for Minnesota sank to 49.4 from 52.6 in April. Minnesota’s farmland-price index declined to 70.7 from April’s 78.3. The new-hiring index for May declined to 59.4 from April’s 61.7. “For 2021, the Minnesota export of farm commodities to Mexico represented 28.9% of all farm commodity exports. The depreciation of the dollar to the peso was very supportive of these exports in 2021,” said Goss.

Missouri: The May RMI for Missouri decreased but remained a regional-high 91.0, down from 94.2 in April. The farmland-price index increased to 86.4 from 81.1 in April. The state’s hiring gauge decreased to 78.8 from April’s 81.1. “For 2021, the Missouri export of farm commodities to Mexico represented 84.6% of all farm commodity exports. The depreciation of the dollar to the peso was very supportive of these exports in 2021,” said Goss.

Nebraska: The Nebraska RMI for May declined to 59.7 from April’s 62.9. The state’s farmland-price index rose to 74.6 from last month’s 62.2. Nebraska’s new-hiring index sank to 64.2 from 66.5 in April. “For 2021, the Nebraska export of farm commodities to Mexico represented 84.0% of all farm commodity exports. The depreciation of the dollar to the peso was very supportive of these exports in 2021,” said Goss.

North Dakota: The North Dakota RMI for May sank to 60.8 from 64.0 in April. The state’s farmland-price index slumped to 75.0 from 82.6 in April. The state’s new-hiring index dropped to 64.8 from April’s 67.1. “For 2021, the North Dakota export of farm commodities to Mexico represented 35.5% of all farm commodity exports. The depreciation of the dollar to the peso was very supportive of these exports in 2021,” said Goss.

South Dakota: The May RMI for South Dakota climbed to 52.3 from April’s 51.8. The state’s farmland-price index fell to 70.4 from 78.0 in April. South Dakota’s May hiring index declined to 59.0 from 61.3 in April. “For 2021, the South Dakota export of farm commodities to Mexico represented 43.6% of all farm commodity exports. The depreciation of the dollar to the peso was very supportive of these exports in 2021,” said Goss.

Wyoming: The May RMI for Wyoming sank to 59.0 from 62.2 in April. The April farmland- and ranchland-price decreased to 74.3 from April’s 81.9. Wyoming’s new-hiring index declined to 63.9 from April’s 66.2. “For 2021, the Wyoming export of farm commodities to Mexico were a negligible share of all farm commodity exports. China was the top export market for Wyoming’s farm commodities,” said Goss.

Tables 1 and 2 summarize the survey findings. Next month’s survey results will be released on the third Thursday of the month, June 16, 2022.

Tables 1 and 2 summarize the survey findings.