Mainstreet Economy

Rural Mainstreet Sinks for the Month:
Farm Loans Rise to Record Level


April Survey Results at a Glance:

* The overall index fell below growth neutral for the 20th straight month.
* Loan volume soars to record level as banks reject fewer loan applications.
* Almost one-third of bankers indicate no change in lending practices stemming from the downturn in the farm economy.
* For 2017, bank CEOs expect approximate cash expenses to exceed cash revenues for 17.1 percent of grain farmers, down from 19.5 percent in 2016.
* Farmland prices declined for the 41st straight month, but the percent of cash farmland sales remained steady from 2015.

OMAHA, Neb. (April 20, 2017) – The Creighton University Rural Mainstreet Index remained weak with a reading below growth neutral for the 20th 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, slipped to 44.6 from 45.3 in March. The last time the overall index was at or above growth neutral was August 2015.

“Weak farm commodity prices continue to squeeze Rural Mainstreet economies. Over the last 12 months, livestock commodity prices have tumbled by 5.8 percent and grain commodity prices have slumped by 4.5 percent. The U.S. Department of Agriculture is estimating 2017 will mark the fourth consecutive year that farm income has declined. This downward trend has pushed our survey results into negative territory,” 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 April slumped to a frail 30.7 from March’s 33.0. This is the 41st straight month the index has languished below growth neutral 50.0.

According to Pete Haddeland, CEO of the First National Bank in Mahnomen, Minnesota, “We are seeing a lot of farm auction sales the last 6 months. Both retirement and getting out of farming.

”The April farm equipment-sales index sank to a very weak 21.5 from 22.0 in February. This marks the 44th consecutive month the reading has fallen below growth neutral 50.0.

Banking: Borrowing by farmers soared for April as the loan-volume index advanced to a record 81.6 from last month’s 58.4. The checking-deposit index slumped to 52.2 from 56.0 in March while the index for certificates of deposit and other savings instruments declined to 44.5 from 47.6 in March.

According to Jim Eckert, president of Anchor State Bank in Anchor, Illinois, “We feel that all our farmers have sufficient equity and determination to survive the current downturn in the farm economy.”

Bank reactions to falling farm income since 2013 have been mixed according to Creighton’s April survey. While the percent of bank rejecting loan applications was a high 30.6 percent, this is down from 35.3 percent recorded last year. Furthermore, almost one-third, or 30.2 percent of bank CEOs, reported no change in lending stemming from weak farm income.Hiring: The job gauge dipped to 57.8 from March’s 59.6. Rural Mainstreet businesses not linked to agriculture increased hiring for the month at a solid pace. 

Confidence: The confidence index, which reflects expectations for the economy six months out, slipped to 45.6 from 47.5 in March indicating a continued pessimistic outlook among bankers. “Until agricultural commodity prices begin to trend higher, I expect banker’s economic outlook to remain weak,” said Goss.

Home and retail sales: Home sales moved higher for the Rural Mainstreet economy for April with a reading of 56.8 from March’s 56.2. The April retail-sales index declined to 40.2 from March’s 41.5. “Much like their urban counterparts, Rural Mainstreet retailers are experiencing pullbacks in sales,” reported 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.Below are the state reports:

Colorado: Colorado’s Rural Mainstreet Index (RMI) declined to 41.8 from 43.0 in March. The farmland and ranchland-price index plummeted to 29.6 from March’s 49.4. Colorado’s hiring index for April decreased to 55.9 from March’s 56.5.

Illinois: The April RMI for Illinois increased to 41.3 from 40.3 in March. The farmland-price index fell to 29.4 from March’s 30.5. The state’s new-hiring index advanced to 55.1 from last month’s 51.1.

Iowa: The April RMI for Iowa sank to 39.1 from 40.0 in March. Iowa’s farmland-price index for April sank to 28.5 from 30.4 in March. Iowa’s new-hiring index for April climbed to 51.5 from March’s 50.5.

Kansas: The Kansas RMI for April slumped to 41.0 from March’s 43.4. The state’s farmland-price index sank to 29.3 from 32.0 in March. The new-hiring index for Kansas declined to 54.7 from 57.2 in March.

Minnesota: The April RMI for Minnesota dipped to 45.9 from March’s 46.1. Minnesota’s farmland-price index slumped to 31.2 from 33.4 in March. The new-hiring index for the state dipped to a strong 62.5 from last month’s 62.7.

Missouri: The April RMI for Missouri advanced to 62.0 from 56.7 in March. The farmland-price index sank to 37.6 from March’s 42.3. Missouri’s new-hiring index jumped to 88.2 from 61.2 in March.

Nebraska: The Nebraska RMI for April rose slightly to a weak 43.9 from 43.3 in March. The state’s farmland-price index fell to 30.4 from March’s 32.0. Nebraska’s new-hiring index expanded to 59.3 from 57.1 in March.

North Dakota: The North Dakota RMI for April slumped to 25.3 from March’s 25.4. The farmland-price index slipped to 23.0 from March’s 23.1. North Dakota’s new-hiring index rose to 29.5 from 21.3 in March.

South Dakota: The April RMI for South Dakota fell to 41.9 from March’s 51.3. The farmland-price index slumped to 29.6 from March’s 36.0. South Dakota's new-hiring index dropped to 56.1 from March’s 73.0.

Wyoming: The April RMI for Wyoming was unchanged from March’s 36.5.  The April farmland and ranchland-price index fell to 27.5 from March’s 28.6. Wyoming’s new-hiring index climbed to 47.5 from 43.5 in March.Tables 1 and 2 summarize the survey findings.

Next month’s survey results will be released on the third Thursday of the month, May 18.