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Rural Mainstreet Economy

Rural Mainstreet Economy for March

March Survey Results at a Glance:

  • Bank CEOs report a slight economic up tick from February’s record low.
  • Farmland-price index plunges to another record low.
  • Farm-equipment-sales index drops to record low.
  • Only 8.1 percent of bankers think the FDIC should seek needed funds by assessing fees on all banks.

Weak Rural Mainstreet Economy for March:
Farmland Prices and Farm Equipment Sales Sag Again

The overall economic index for the Rural Mainstreet economy increased slightly for March, but continues to point to significant economic weakness, according to the March survey of bank CEOs in an 11-state region.

The Rural Mainstreet Index (RMI), which ranges between 0 and 100, inched up to 18.7 from February’s record low 16.9.

“Since February of last year, the Rural Mainstreet economy has trended downward. The March 2009 reading compares to a 46.3 for March 2008. The RMI has now moved below growth neutral 50.0 for 13 consecutive months. Of course, all of the states in the survey are being negatively affected by the national and global recession. However, states with a significant mining and natural resources industry, such as North Dakota and Wyoming, have held up much better than other states,” said Creighton University economist Ernie Goss. Goss and Bill McQuillan, CEO of City National Bank in Greeley, Neb., created the monthly economic survey.

The strong dollar has made U.S. products less competitive abroad and dampened agriculture commodity prices and farm income. As a result, farm income for 2009 is stacking up to be much less favorable than it was in 2008. Weaker agriculture commodity prices have had important and negative affects on farmland prices and the sale of farm equipment. The farmland-price index moved below growth neutral for the fifth straight month. “After peaking at 81.0 in January of 2008, the index declined to 33.1, a record low, and down from February’s 38.3. Furthermore, the farm-equipment sales index slumped to 30.0 for March, a record low, and down from February’s 31.0,” said Goss.

However, there were definite pockets of strong farmland price growth. Barry Linnens, CEO of Cottonwood Valley Bank in Cedar Point, Kan., reported that land prices were holding up in the Flint Hills area of Cedar Point, and Michael Johnson, CEO of Swedish American State Bank in Courtland, Kan., added that recent sales of land in his area were definitely higher with prices at $3,400 an acre.

For the sixth straight month, the confidence index, which tracks expectations for the Rural Mainstreet economy six months out, stood at a very low level. However, the index did spike upward to 35.9 from February’s 21.2. “Apparently, aggressive actions by the Federal Reserve and the U.S. Treasury have reduced the angst for some of the CEOs, but there remain considerable concerns regarding the economic health of the U.S. and global economies,” said Goss.

Hiring in the area has been anemic since the beginning of 2008 and weakened almost every month in 2008 with the negative trend continuing for 2009. The new-hiring index for March advanced to an anemic 23.0 from February’s record low 14.7. “This is the 15th consecutive month that the index has been below growth neutral, due in part to a slowing national economy and a much more negative outlook for the farm economy in 2009,” said Goss.

Like much of the nation, retail sales were very weak for the month with a March retail-sales index of 18.7, which was up slightly from February’s, record low 18.4.

Just like the national housing market, home sales were frail for Rural Mainstreet with the home-sales index at an anemic 24.6, unchanged from February.

Despite the economic lethargy across Rural Mainstreet and the national banking crisis, bankers on Rural Mainstreet reported healthy banking numbers. The loan-volume index rose to 46.2 from 43.9 in February reflecting some tightening of credit, but still not in a range to cause concern. For March, checking deposits expanded to 67.4 from February’s 61.4 and January’s 60.8.


The index for certificates of deposit and other savings instruments climbed to 62.9 from February’s 56.4 and January’s 57.6. Rising funds in Rural Mainstreet banks are indicative of continuing solid balance sheets among farmers even as Rural Mainstreet businesses struggle.

This month bankers were asked several questions regarding the national financial crisis. Recently the Federal Deposit Insurance Commission (FDIC) announced that due to heavy insured bank losses, the cost of insurance would be going up for member banks. Bankers were asked if they would recommend an alternative funding methodology. Almost two-thirds, 66.1 percent, of the bankers propose assessing fees on “big” national banks. However, David Steffensmeier, president of the First National Bank in Beemer, Neb., said that, “the answer is a combination of borrowing funds from the Treasury in the short-term along with assessing the banks a lower one time charge and higher fees going forward to repay the Treasury and replenish the FDIC fund.”

In their assessment of the steps taken by the U.S. Treasury, 36.9 percent of bankers gave the Treasury negative marks, while 35.7 percent gave a positive grade. “Treasury needs to articulate how they are going to rid the financial system of the systemic risk of too big to fail. No firms should be allowed to grow to the size that they jeopardize the whole financial system,” said Bradley Robson, CEO of First State Bank in Belmond, Iowa.

Larry Winum, president of Glenwood Bank in Glenwood, Iowa, reflected the concerns of many of the community bankers when he stated that, “It is time to break these large entities up so that they no longer cause such a large systemic risk to the economy. Community banks and the tax payers are fed up with paying for the irresponsible acts of the large financial institutions.”

Bankers like Jeffrey Gerhart CEO of the Bank of Newman Grove, Newman Grove, Neb., argue that the industry needs to consider a higher reserve ratio than is currently used. He contends that the reserve level was not high enough to withstand the financial crisis that the country is now facing.

Each month, community bank presidents and CEOs in non-urban, agriculturally and resource-dependent portions of an 11-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, Montana, Nebraska, North Dakota, South Dakota and Wyoming are included. The average community-population size covered by the survey is approximately 1,300 with almost 200 communities represented in the survey. This survey represents the earliest snapshot of the economy of the rural, agriculturally and energy dependent portions of the nation.

View the complete report at

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