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Mainstreet Economy

The Rural Mainstreet Economic Index Falls Below Growth Neutral: Fourth Straight Month of Deterioration

September 2022 Survey Results at a Glance:

• The overall index fell below growth neutral for the fourth consecutive month. 
• New hiring sank across the region. 
• More than two of 10 bank CEOs reported drought impacts were the greatest economic challenge going forward. 
• Four of 10 bankers indicated that high and escalating farm input costs were the greatest economic challenge to their bank and area over the next 12 months.
• Approximately 80% of bankers expect the costs of California’s Proposition 12 to be paid by consumers, with only 11.5% expecting the livestock producer to pay the costs. 

Creighton University Rural Mainstreet Index (RMI)

OMAHA, Neb. (Sept. 15, 2022) — The Creighton University Rural Mainstreet Index (RMI) fell for the fifth straight month, sinking below growth neutral for a fourth consecutive 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 September once again sank below growth neutral to 46.3, but it was up from 44.0 in August. The index ranges between 0 and 100 with a reading of 50.0 representing growth neutral. This was the fourth consecutive month the overall reading has fallen below growth neutral. 

Four of 10 bankers indicated that high and escalating farm input costs were the greatest economic challenge to their bank and area over the next 12 months. 

“The Rural Mainstreet economy is now experiencing a downturn in economic activity. Supply chain disruptions and inflationary pressures from higher farm input costs continue to constrain growth. Farmers and bankers are bracing for escalating interest rates, higher farm input costs, and drought,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

James Brown, CEO of Hardin County Savings Bank in Eldora, Iowa, reported that, “initial farm customer reviews show good crop production and cash flow analyses.”

More than one of five, or 21.4%, of bank CEOs reported drought impacts were the greatest economic challenge going forward. 

Farming and ranching: The region’s farmland price index for September climbed to 61.1 from August’s 60.0, marking the 24th straight month that the index has moved above growth neutral.  

Jim Eckert, president of Anchor State Bank in Anchor, Ill. reported that, “increases in interest rates and farm inputs will adversely affect our farmers.”

This month, bankers were asked their assessment of the impact of California’s Proposition 12, which establishes minimum requirements for confining certain farm animals for livestock producers in their area. Almost half, or 46.2%, of bankers expect little or no economic loss to livestock producers on Rural Mainstreet.  

Four of five bankers expect any costs of Proposition 12 to be paid by consumers, with only 11.5% expecting the livestock producers to pay the costs. 

Jeff Bonnett, president of Havana National Bank in Havana, Ill., like many bankers, assessed only small impacts since his area is primarily engaged in crop production. 

According to Jim Rothermich of the Land Talker, five farmland sales auctions between August 27 and September 2 yielded sales of greater than $20,000 per acre in Iowa counties of Ida, Dubuque and Sioux. 

Farm equipment sales: After falling below growth neutral in August, the farm equipment-sales index soared to 58.0 for September from 45.9 in August. The index has risen above growth neutral for 21 of the last 22 months. 

Banking: The September loan volume index climbed to a strong 79.5 from 73.9 in August. The checking-deposit index fell to 46.3 from August’s 47.9, while the index for certificates of deposit and other savings instruments decreased to 34.6 from 35.4 in August. “Higher costs of farm inputs and drought conditions in portions of the region supported stronger borrowing from farmers,” said Goss.

Hiring: The new hiring index fell to the growth neutral threshold of 49.2 from 52.0 in August.  Labor shortages continue to be a significant issue constraining growth for Rural Mainstreet businesses. Despite labor shortages, Rural Mainstreet expanded non-farm employment by 3.0% over the past 12 months. This compares to an identical 3.0% growth for urban areas of the same 10 states for the same period-of-time.

Confidence: The slowing economy, strong energy prices and high agriculture input prices constrained the business confidence index to 40.7 in September, which was up from 38.0 in August.

Home and retail sales: The home-sales index increased to a weak 46.2 from August’s even weaker 44.0. The retail-sales index for September sank to 46.0 from August’s 48.0. “Rising energy prices and higher interest rates reduced home and retail sales on Rural Mainstreet. This is the lowest home sales index since December 2016,” 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. The index 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 (RMI) for September rose to 59.8 from August’s 56.8. The farmland- and ranchland-price index sank to 60.1 from 67.1 in August. Colorado’s hiring index for September fell to 58.4 from August’s 60.3. According to the Office of Trade & Economic Analysis, Colorado has exported $54 million of agriculture products to-date in 2022, which represents an expansion of 3.8% from the same period in 2019.   

Illinois

The September RMI for Illinois increased to 44.5 from 44.0 in August. The farmland-price index moved up to 62.2 from 61.7 in August. The state’s new-hiring index slumped to 50.4 from August’s 61.7. According to the Office of Trade & Economic Analysis, Illinois has exported $1,666 million of agriculture products to-date in 2022, which represents an expansion of 30.9% from the same period in 2019. Jim Eckert, president of Anchor State Bank said, “recent cool weather and rains have delayed harvest in our area. Farmers expect yield reductions from 2021. How much is still to be determined.”

Iowa

The September RMI for Iowa increased to 48.0 from 40.1 in August. Iowa’s farmland-price index increased to 63.7 from August’s 63.5. Iowa’s new-hiring index for September dropped to 52.3 from August’s 55.9. According to the Office of Trade & Economic Analysis, Iowa has exported $1,441 million of agriculture products to-date in 2022, which represents an expansion of 116.2% from the same period in 2019.   

Kansas

The Kansas RMI for September rose to 40.8 from August’s 39.4. The state’s farmland-price index increased to 60.6 from August’s 59.7. The new-hiring index for Kansas slumped to 48.4 from 51.2 in August. According to the Office of Trade & Economic Analysis, Kansas has exported $1,414 million of agriculture products to-date in 2022, which represented an expansion of 66.0% from the same period in 2019.   

Minnesota

The September RMI for Minnesota increased to 37.2 from August’s 34.8. Minnesota’s farmland-price index climbed to 59.1 from August’s 57.8. The new-hiring index for September plummeted to 46.5 from 48.8 in August. According to the Office of Trade & Economic Analysis, Minnesota has exported $966 million of agriculture products to-date in 2022, which represents an expansion of 277.3% from the same period in 2019.   

Missouri

The September RMI for Missouri decreased to 57.3 from 58.3 in August. The farmland-price index rose to 71.1 from August’s 69.7. The state’s hiring gauge sank to 61.3 from 63.6 in August. According to the Office of Trade & Economic Analysis, Missouri has exported $700 million of agriculture products to-date in 2022, which represents an expansion of 211.1% from the same period in 2019.   

Nebraska

The Nebraska RMI for September dropped below growth neutral to 49.3 but was up from August’s 47.8. The state’s farmland-price index increased to 64.3 from last month’s 63.3. Nebraska’s September’s new-hiring index sank to 48.3 from 55.6 in August. According to the Office of Trade & Economic Analysis, Nebraska has exported $723 million of agriculture products to-date in 2022, which represents an expansion of 9.5% from the same period in 2019.   

North Dakota

The North Dakota RMI for September rose to 50.0 from 49.2 in August. The state’s farmland-price index climbed to 64.8 from 63.9 in August. The state’s new-hiring index dropped to 53.6 from August’s 56.4. According to the Office of Trade & Economic Analysis, North Dakota has exported $541 million of agriculture products to-date in 2022, which represents an expansion of 71.7% from the same period in 2019.   

South Dakota

The September RMI for South Dakota rose to 39.7 from 37.3 in August. The state’s farmland-price index sank to 58.2 from 58.8 in August. South Dakota’s September hiring index measured 47.9 compared to 50.1 in August. According to the Office of Trade & Economic Analysis, South Dakota has exported $67 million of agriculture products to-date in 2022, which represents an expansion of 81.1% from the same period in 2019.   

Wyoming

The September RMI for Wyoming increased slightly to 44.2 from 44.0 in August. The August farmland- and ranchland-price index climbed to 62.1 from 61.7 in August. Wyoming’s new-hiring index declined to 50.3 from August’s 53.6. According to the Office of Trade & Economic Analysis, Wyoming has exported $3 million of agriculture products to-date in 2022, which represents no gain from the same period in 2019.   

Tables 1 and 2 summarize the survey findings. Next month’s survey results will be released on the third Thursday of the month, October 20, 2022.