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Rural Mainstreet Index Weakens in June

Sale of Farmland to Nonfarm Investors Declines

June Survey Results at a Glance:

  • Rural Mainstreet Index falls for the first time since February of this year.
  • Farmland prices decline for seventh straight month, but rate of decline slows.
  • Almost half of bankers reported higher beef and pork prices are a big plus.
  • The percent of farmland sales for cash declined to 23.7 percent from 28.4 this time last year.
  • Over the past year, bankers reported that the percent of farmland purchased by nonfarm investors sank to 14.4 percent from 19.7 percent.

After moving below growth neutral in February, the Rural Mainstreet economy has moved above the 50.0 threshold for four straight months, according to the June survey of bank CEOs in a 10-state area. However, the index was down from May signaling slower growth.

Overall: The Rural Mainstreet Index (RMI), which ranges between 0 and 100, with 50.0 representing growth neutral, fell to 53.6 from May’s 55.6. “The overall index for the Rural Mainstreet Economy indicates that economic conditions of the areas of the nation highly dependent on agriculture and energy are positive, but somewhat weaker compared to this time last year,” said Ernie Goss, Ph.D., the Jack A. MacAllister Chair in Regional Economics at Creighton University Heider College of Business.

Almost half, or 47.3 percent, of bankers reported that higher beef and pork prices have increased overall economic activity in their area. Most of the remaining bankers indicated little livestock production in their area or very low livestock inventories restrained gains.

However, some bankers anticipate a downside to higher livestock prices. According to David Steffensmeier, president of first Community Bank in Beemer, Neb., “High beef and pork prices will cause the same problems that high grain prices did the last few years - unreasonable expectations.”

Farming and ranching: The farmland and ranchland-price index for June rose to a weak 49.1 from May’s even weaker 46.7. “Despite the slight improvement, this is the seventh straight month that this index has moved below growth neutral. Stronger farm commodity and grain prices over the last several months appear to have put a floor under farmland prices. I expect the index to move above growth neutral next month,” said Goss.

The June farm-equipment sales index inched forward to 35.0 from 33.6 in May. The index has been below growth neutral for 12 straight months. “Despite improving economic activity on the regional farm, agriculture equipment and implement dealers in the region are experiencing very weak sales to farmers in the region. On the other hand, farm equipment manufacturers continue to experience positive growth due to healthy sales abroad,” said Goss.

This month bankers were asked what share of farmland that was sold for cash and what share sold to investors and non-farmers. On average, approximately 23.7 percent, or almost one-fourth, of the farmland sales were cash purchases, which is down from 28.4 percent last year at this time when the survey asked this same question.

Bankers reported that the percent of farmland purchased by nonfarm investors sank to 14.4 percent from 19.7 percent this time last year. “Consistent with declines in farmland prices, we are tracking less interest among nonfarm investors in terms of farmland purchases,” said Goss.

Banking: The June loan-volume index slipped to a still robust 74.6 from 75.4 in May. The checking-deposit index declined to 50.9 from May’s 54.8, while the index for certificates of deposit and other savings instruments dipped to 39.4 from 40.3 last month.

Hiring: Rural Mainstreet businesses continue to hire at a solid pace, though the June hiring index declined slightly to 63.2 from May’s very healthy 64.0. “Currently the Rural Mainstreet economy is adding jobs at a pace well above the long-term average and significantly above the rate of growth in urban areas of the region,” said Goss.

Confidence: The confidence index, which reflects expectations for the economy six months out, advanced to 55.5 from last month’s 51.6. “Despite international tensions and rising oil prices, higher agriculture commodity prices, especially for beef and pork, pushed the outlook higher for the month,”

Home and retail sales: The June home-sales index climbed to 66.1 from 63.9 in May. The June retail-sales index increased only slightly to 51.8 from 51.7 in May. “Improving weather encouraged an upturn in home purchases. However, retail sales are down from this time last year,” 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: After moving below growth neutral for February, Colorado’s Rural Mainstreet Index (RMI) remained above the 50.0 threshold for the fourth straight month, though it dipped to 54.4 from May’s 56.3. The farmland and ranchland-price index declined to 54.8 from 55.4 in May. Colorado’s hiring index for June decreased to a healthy 67.3 from 70.1 in May.

Illinois: After increasing for two straight months Illinois’ RMI fell, moving to 53.9 from May’s 55.8. The Illinois farmland-price index rose to 46.6 from 42.3 in May. The state’s new-hiring index improved to 60.8 from May’s 59.6.

Iowa: The June RMI for Iowa expanded to 56.8 from May’s 55.8. The state’s farmland-price index for June advanced to 57.8 from May’s 44.1. Iowa’s new-hiring index for June soared to 73.9 from May’s 61.1.

Kansas: The Kansas RMI for June slipped to 54.4 from May’s 56.3. The farmland-price index for June increased to 54.7 from May’s 52.2. The state’s new-hiring index fell to a healthy 67.3 from 67.5 in May.

Minnesota: The RMI for Minnesota dipped to 54.3 from May’s 56.4. Minnesota’s farmland-price index for June declined to 53.6 from 55.2 in May. The new-hiring index for the state decreased to 69.1 from May’s 69.9.

Missouri: The June RMI for Missouri sank to 55.9 from May’s 57.2. The farmland-price index for June fell to 57.8 from May’s 68.4. Missouri’s new-hiring index declined to a still healthy 62.3 from May’s 80.5.

Nebraska: The Nebraska RMI for June fell to 53.7 from May’s 55.3. The state’s farmland-price index for June advanced to a weak 41.3 from 37.1 in May. Nebraska’s new-hiring index climbed to a solid 56.5 from May’s 55.4. Several bankers reported positive fallout from bad weather. Donald Schmaderer, president of Tri-County Bank in Stuart, said, “There is a significant amount of wind and hail damage across parts of north-central and northeast Nebraska.” Larry Rogers, executive vice-president of First Bank of Utica, said, “Severe storms have created employment opportunities for replacing pivots, shingling houses, and construction jobs. Small housing contractors are booked for some time ahead.”

North Dakota: The North Dakota RMI for June dipped to 56.6 from May’s 57.8. The farmland-price index fell to 61.1 from May’s 71.8. North Dakota’s new-hiring index expanded to 84.4 from May’s 83.2.

South Dakota: The June RMI for South Dakota expanded to 56.2 from May’s 55.7. The farmland-price index for June increased to 46.4 from last month’s 41.9. South Dakota's new-hiring index advanced to 60.6 from 59.3 in May. David Callies, CEO of Miner County Bank in Howard, reported, “Excellent moisture, but big concern for low crop prices.”

Wyoming: The June RMI for Wyoming sank to 54.2 from May’s 56.0. The June farmland and ranchland-price index declined to 47.0 from May’s 47.4. Wyoming’s new-hiring index for June fell to 60.8 from May’s 63.8.