Mainstreet Economy

Rural Mainstreet Index Below Growth-Neutral for 12th Straight Month: Farmland Prices Expected to Decline Further

August Survey Results at a Glance:

* For a 12th straight month, the Rural Mainstreet Index fell below growth neutral.
* Farmland prices remained below growth neutral for the 33rd consecutive month.
* Bank CEOs expect farmland prices to fall by another 6.9 percent over the next 12 months.
* Approximately 56.5 percent of bank CEOs expect the Federal Reserve to raise rates before the end of 2016.
* Agricultural equipment sales remain close to record low.
 
For Immediate Release:  Aug.18, 2016
OMAHA, Neb. – The Creighton University Rural Mainstreet Index rose for August, but remained below growth neutral for the 12th 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 index, which ranges between 0 and 100 increased to 41.1 for August from July’s weak 39.8. This month’s reading is well off the index for August 2015 when it stood at 50.0. 
 
“Over the past 12 months, farm prices have fallen by 11 percent, cattle prices are off by 22 percent, and grain prices are down by 20 percent.  Weak agricultural commodity prices are pushing farm income lower and sinking the overall Rural Mainstreet economy,” said Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University's Heider College of Business.
 
Farming and ranching: The farmland and ranchland-price index for August slumped to 25.6 from 31.3 in July. This is the 33rd straight month the index has languished below growth neutral 50.0.
 
This month, bankers estimated, on average, farmland prices would fall by another 6.9 percent over the next 12 months. However, as in previous months, there is a great deal of variation across the region in the direction and magnitude of farmland prices, with prices growing in some portions of the region.

Bank CEOs reported an average annual cash rent per acre of $252 with almost one-fourth of bankers detailing annual cash rents exceeding $299.
 
The August farm equipment-sales index increased to 14.8 from 10.7 in July. “Weakness in farm income and low agricultural commodity prices continue to restrain the sale of agriculture equipment across the region,” said Goss.
 
Banking: Borrowing by farmers remains strong as the August loan-volume index expanded to 78.3 from last month’s 67.4. The checking-deposit index fell to 41.3 from 49.0 in July, while the index for certificates of deposit and other savings instruments improved slightly to 44.5 from 43.9 in July.
 
Approximately 56.5 percent of bank CEOs expect the Federal Reserve to raise rates before the end of 2016.
 
Hiring: After moving above growth neutral for June, the Rural Mainstreet hiring index fell below the threshold for July and August. According to bankers, Rural Mainstreet businesses reduced jobs for August with a hiring index of 47.9 which was down from July’s 49.0.
 
“Rural Mainstreet employment is down by approximately 1.6 percent from this time last year,” said Goss. “This contrasts to employment gains for urban areas of the region of approximately 1.5 percent for the same 12-month period.”
 
Confidence: The confidence index, which reflects expectations for the economy six months out, plummeted to 27.2 from 32.3 in July indicating an intense pessimistic outlook among bankers. “Negative economic assessments by the U.S. Department of Agriculture for 2016 farm income combined with recent downturns in agricultural commodity prices pushed banker’s economic outlook even lower,” said Goss.
 
Home and retail sales: Home sales remain the bright spot of the Rural Mainstreet economy with a robust August index of 58.9, but down from July’s 61.5. The August retail-sales index increased slightly to a very weak 38.1 from July’s 37.8. “Despite low inventories of homes for sale, Rural Mainstreet home sales continue on a strong trajectory, but rural retailers, much like their urban counterparts, are experiencing downturns in sales,” said Goss. 
 
Each month, community bank presidents and CEOs in nonurban agriculturally and energy-dependent portions of a 10-state area are surveyed regarding current economic conditions in their communities and their projected economic outlooks six months down the road. Bankers from Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming are included. The survey is supported by a grant from Security State Bank in Ansley, Neb.
 
This survey represents an early snapshot of the economy of rural agriculturally and energy-dependent portions of the nation. The Rural Mainstreet Index (RMI) is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. It gives 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 in 2005.
 
Colorado:
Colorado’s Rural Mainstreet Index (RMI) declined slightly to 51.1 from 52.4 in July. The farmland and ranchland-price index soared to 59.0 from July’s 42.1. Colorado’s hiring index for August rocketed to 64.8 from July’s 52.6.  Colorado job growth over the last 12 months; Rural Mainstreet, 0.7 percent; Urban Colorado, 3.0 percent.
 
Illinois: The August RMI for Illinois increased to a feeble 21.2 from July’s regional low of 18.1. The farmland-price index fell to 17.5 from July’s 29.4. The state’s new-hiring index rose to 44.2 from last month’s 42.4. Illinois job growth over the last 12 months; Rural Mainstreet, -1.9 percent; Urban Illinois 1 percent.
 
Iowa: The August RMI for Iowa advanced to a strong 58.3 from July’s 51.9. Iowa’s farmland-price index for August slumped to 40.5 from 49.7 in July. Iowa’s new-hiring index for August expanded to 58.1 from July’s 55.4. Iowa job growth over the last 12 months; Rural Mainstreet, 1.1 percent; Urban Iowa, 1.7 percent.
 
Kansas:
The Kansas RMI for August sank to 24.6 from July’s 37.4. The state’s farmland-price index for August slumped to 13.4 from 25.6 in July. The new-hiring index for Kansas increased to 44.6 from 39.5 in July. Kansas job growth over the last 12 months; Rural Mainstreet, -1.1 percent; Urban Kansas, 0.9 percent.
 
Minnesota: The August RMI for Minnesota fell to 30.3 from July’s 35.9. Minnesota’s farmland-price index slumped to 18.0 from 30.0 in July. The new-hiring index for the state climbed to 49.9 from last month’s 48.2. Minnesota job growth over the last 12 months; Rural Mainstreet, -0.7 percent; Urban Minnesota 1.6 percent.
 
Missouri: The August RMI for Missouri plummeted to 22.4 from 37.8 in July. The farmland-price index slipped to 14.9 from July’s 29.6. Missouri’s new-hiring index fell to 17.1 from 22.6 in July. Missouri job growth over the last 12 months; Rural Mainstreet, -11.7 percent; Urban Missouri 2.1 percent.
 
Nebraska: The Nebraska RMI for August advanced to regional high of 64.5 from 51.5 in July. The state’s farmland-price index sank to 43.5 from July’s 49.3. Nebraska’s new-hiring index grew to 59.2 from 55.2 in July. Nebraska job growth over the last 12 months; Rural Mainstreet, 1.6 percent; Urban Nebraska, 1.1 percent.
 
North Dakota: The North Dakota RMI for August fell to 17.8 from 35.9 in July. The farmland-price index sank to 12.1 from July’s 21.2. North Dakota’s new-hiring index slumped to 25.6 from June’s 38.9. North Dakota job growth over the last 12 months; Rural Mainstreet, -9.2 percent; Urban North Dakota, 1.2 percent.
 
South Dakota: The August RMI for South Dakota advanced to 54.3 from July’s 40.1. The farmland-price index slipped to 27.3 from 28.0 in July. South Dakota's new-hiring index improved to 53.3 from July’s 47.5. South Dakota job growth over the last 12 months; Rural Mainstreet, 0.9 percent; Urban South Dakota, 3.2 percent.
 
Wyoming: The August RMI for Wyoming plummeted to 18.9 from July’s 31.2. The July farmland and ranchland-price index fell to 15.6 from 30.3 in July. Wyoming’s new-hiring index increased to 39.6 from July’s 34.9. Wyoming job growth over the last 12 months; Rural Mainstreet, -2.6 percent; Urban Wyoming, -2.3 percent.
   
Tables 1 and 2 summarize the survey findings. Next month’s survey results will be released on the third Thursday of the month, Sept. 15.