July Survey Results at a Glance:
–Rural Mainstreet Index declines slightly for the month, but remains in positive range.
–Farmland price and farm equipment sales growth slump for July.
–Approximately 68 percent of bankers support phasing out the blenders’ tax credit for ethanol over the next five years as a component of U.S. debt reduction.
–Approximately 35 percent of bank CEOs support phasing out federal crop support payments over the next five years as a component of U.S. debt reduction.
Rural Mainstreet Economy Expands for July:
Farmland Price Growth Slows for Month
The July overall index for the Rural Mainstreet economy remained above growth neutral 50.0 for a ninth straight month indicating that the rural, agriculturally dependent, areas of the region continue to expand at positive pace, according to this month’s survey of bank CEOs in a 10-state region.
Overall: The Rural Mainstreet Index (RMI), which ranges between 0 and 100, remained solid even though it dipped to 55.7 from June’s 56.0.
Creighton University economist Ernie Goss said, “Even though the Rural Mainstreet economy is expanding, many of our indicators are trending lower.” Goss and Bill McQuillan, CEO of CNB Community Bank of Greeley, Neb., created the monthly economic survey in 2005.
Farming: The farmland price index slumped to 59.4 from June’s 62.0. “Even though this is the 18th straight month the index was above growth neutral, we are tracking consistent slippage in farmland price growth as the index has declined for three straight months. Consistent with the decline in farmland price growth, the farm equipment sales index sank for the fourth consecutive month to 53.7 from 63.1 in June,” said Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton.
This month bankers were agriculture’s contribution to current debt reduction deliberations. Bankers were asked about ending the blenders’ tax credit for ethanol as a part of U.S. debt reduction. Approximately 68 percent supported phasing out the credit over the next five years while 13 percent indicated that the blenders tax credit should be maintained at its current level. The remaining 19 percent supported ending the credit by the end of 2011.
In terms of agriculture support payments, 35 percent of bank CEOs supported phasing out agriculture support payments over five years while an equal 35 percent indicated that agriculture support payments for farms with over $500,000 in revenues should be limited. Almost 9 percent indicated that the farm support payments should cease by the end of 2011 and 22 percent supported maintaining payments, as they currently exist.
Dan Coup, president of First National Bank in Hope, Kan., said, “If the government wants to continue with a cheap food policy, payment support needs to remain. Subsidy on crop insurance premiums is a must.”
Banking: The loan volume index for July expanded to 66.4 from 59.0 in June. The checking deposit index fell to 52.8 from June’s 59.7 while the index for certificates of deposit and other savings instruments were up, but weak, at 43.7 from 41.7 in June.
Jobs: After adding jobs for seven straight months, the Rural Mainstreet economy lost jobs, albeit slowly, with a July index of 49.3, down from June’s 51.5. “Supported by continuing strength in the energy and farm sectors, the pace of job growth for the Rural Mainstreet economy remains much stronger than urban areas of the 10-state survey region,” said Goss.
Confidence: The economic confidence index, which reflects expectations for the economy six months out, slipped to 55.0 from 55.3 in June. “Even though confidence remains fairly robust, flooding and other weather related issues in areas of the region eroded confidence among some of the bankers,” said Goss.
Home and retail sales: For the fifth time since June of last year, the home sales index was above growth neutral though the July index was down at 51.4 from 53.0 in June. The retail sales index for July slipped below growth neutral to 47.9, but was up from 47.0 in June. “In terms of retail sales, higher fuel prices and weather related issues restrained retail sales for Rural Mainstreet vendors for July,” said Goss.
Each month, community bank presidents and CEOs in nonurban, agriculturally and energy-dependent portions of the 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.
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.
Colorado: For the seventh straight month, Colorado’s Rural Mainstreet Index (RMI) moved above growth neutral. The July reading fell to 55.9 from June’s 56.1. The July farmland and ranchland price index slumped to 58.0 from 62.1 in June and 75.3 in May. Colorado’s new hiring index was 48.8 for July.
Illinois: The Illinois RMI remained above growth neutral for the 15th straight month. The July index dipped to 56.6 from June’s 56.7. Farmland prices remain above growth neutral but the reading fell to 58.9 from June’s 63.9. The state’s new hiring index was a healthy 50.6 for July. Jim Ashworth, president of Carlinville National Bank in Carlinville, said, “Projecting the local economy out 6 months is somewhat difficult given all the uncertainty, but since most grain farmers have pre-priced much of their production, there should be a boost.”
Iowa: The RMI for Iowa climbed to 58.7 from June’s 56.6. The farmland price index slumped to a strong 59.0 from June’s 63.6. Iowa’s new hiring index for July was a weak 49.9.
Kansas: The RMI for Kansas was above growth neutral 50.0 for the month. The index dipped to 55.4 from 55.7 in June. The farmland price index sank to 56.7 from June’s 61.3. The state’s new hiring index was a weak 47.6 for July. Dale Bradley, CEO of The Citizens State Bank in Miltonvale reported, “The economy is very unstable and fragile at this time. Several corrections need to be made before the overall economy can improve and we can then all gain more confidence in our future.”
Minnesota: The July RMI for Minnesota increased to 57.3 from 56.4 in June. Minnesota’s farmland price index fell to 58.8 from June’s 63.0. The state’s new hiring index was a weak 49.7. Pete Haddeland, CEO of First National Bank in Mahnomen said, “Our crops have turned around very well in the last several weeks and are looking great. Everyone is watching what will happen with Minnesota state government.”
Missouri: The RMI for Missouri expanded to 55.3 from 51.3 in June. The farmland price index for Missouri slumped to 56.5 from 60.5 in June. The state’s new hiring index was a regional low 47.3 from July. Alden Buerge, CEO of First State Bank in Joplin, reported continuing housing shortages and an upturn in retail sales resulting from spring tornados.
Nebraska: The July RMI for Nebraska fell to 56.8 from 57.2 in June. The farmland price index declined to 56.8 from 65.0 in June. The state’s new hiring index stood at 51.2 for July. John Nelsen, president of First Tier Bank in Holderege, said, “With land, equipment and input costs skyrocketing, the current commodity prices have given us a false sense of security. More mature farmers will be reminded of the 1980s and the young farmers will have to learn.”
North Dakota: The North Dakota RMI for July fell to a regional high 58.9 from 59.3 in June. The farmland price index fell to 65.5 from 71.3 in June. The state’s new hiring index was a healthy 56.4. Scott Tewksbury, CEO of Heartland State Bank in Edgeley said, “Severe weather outbreaks and excessive rain have had some impacts on area farms.”
South Dakota: For a ninth straight month, the RMI for South Dakota was above growth neutral. The index for July slipped to 55.7 from 56.3 in June. The farmland price index plunged to 57.6 from June’s 62.7. South Dakota's new hiring index for July was 48.4.
Wyoming: The Wyoming RMI for July climbed to 57.4 from 56.4 in June. The July farmland and ranchland price index sank to 58.8 from 63.1 in June. The state’s new hiring index was a weak 49.6 for July. Kent Shurtleff, CEO of Wyoming National Bank in Riverton said, “Cow and calf producers should fair pretty well this season. Cow wintering costs will be crucial for 2012.”
Next month’s survey results will be released on the third Thursday of the month, Aug. 18.