Farmland Price Expansions Lowest for Year
June Survey Results at a Glance:
- Rural Mainstreet Index declines.
- Farmland prices continue to grow, but at a slower pace.
- Almost 90 percent of bankers support removing food stamps from the new farm bill.
- Approximately 64 percent of bankers say the new farm bill should support agriculture and energy research.
The Rural Mainstreet Index (RMI) for June slumped to its lowest level in 2012.
Overall: The Rural Mainstreet Index (RMI), which ranges between 0 and 100 with 50.0 representing growth neutral, declined to 56.7, its lowest level since October of last year, and was down from last month’s 58.5.
Dale Bradley, CEO of Citizens State Bank in Miltonvale, Kans., said, “International economic problems are affecting us here (Rural Mainstreet economy).”
Creighton University economist Ernie Goss said, “Our surveys point to slower but positive growth for the agriculturally and energy dependent areas of the nation. The global economic slowdown combined with a stronger U.S. dollar has pushed agriculture and energy prices lower. This is weakening overall growth for the Rural Mainstreet economy.”
Goss and Bill McQuillan, CEO of CNB Community Bank of Greeley, Neb., created the monthly economic survey in 2005.
Farming: According to the June survey farmland prices continue to head higher. However, for a third straight month, farmland price growth weakened with the June index dropping to 60.0, its lowest level since July of last year and down from last month’s 64.6. Even so, this is the 29th consecutive month the index has been above growth neutral. The farm-equipment sales index sank to 54.7, its lowest level since July of last year and down significantly from last month’s 65.1. “Europe’s economic turmoil has pushed the value of the U.S. dollar higher and agriculture prices lower. Over the past two months, for example, farm products have declined by 3 percent. This is slowing growth in the farm sector for both farmland and farm-equipment sales,” said Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton.
This month, bank CEOs were asked about changes in the new farm bill currently before Congress. “Approximately 87 percent supported separating the food stamps program from the 2012 farm bill. The bill under consideration also includes spending for agriculture and energy research. Approximately 64 percent of the bankers support such spending while 16 percent are opposed to this spending. The remaining 19 percent expressed no opinion on this spending element,” said Goss.
Pete Haddeland, CEO of First National Bank in Mahnomen, Minn., expressed a common theme saying, “The new farm bill should support the current crop insurance amounts.”
Almost one fourth, 23.7 percent, of bankers with cattle operations in their area indicated that farmers were reducing the size of their herds due to dry weather, including Dan Coup, CEO of First National Bank in Hope, Kan., who reported that due to drought conditions, some ranchers were being forced to move cattle off of grass. He added, “Several ranchers are hauling water to cattle on grass due to lack of pond water. One rancher in Marion County lost 22 head of cattle caused by blue-green algae in his farm pond.”
Steven Lane, CEO of Security Savings Bank in Farnhamville, Iowa, said, “Dry conditions have not only affected cattle herds, they have affected land and equipment sales.”
Banking: Farmers increased their demand for loans with the loan-volume index climbing to 64.2 from May’s 56.9. This marks the fourth consecutive month the index has risen. The checking-deposit index sank to 55.3 from May’s 62.9, while the index for certificates of deposit and other savings instruments slumped to 38.9 from 41.7 in May. “As farmland prices and farm-equipment sales have risen, so have farmers’ financing demands. Each month, farmers are reducing the amount of cash purchases of farmland and farm equipment and increasing the degree of bank financing,” said Goss.
Hiring: June’s s hiring index dipped slightly to a still strong 59.1 from 59.2 in May. “Job growth across the Rural Mainstreet economy continues to exhibit a great deal of geographic variation with strong growth in Colorado, Iowa, Kansas, Minnesota, and North Dakota. Employment growth was much weaker in rural Illinois, Missouri, Nebraska, South Dakota and Wyoming. Overall government data shows that job growth in urban areas is currently double that in rural areas,” said Goss.
Confidence: The confidence index, which reflects expectations for the economy six months out, dipped to 58.5 from May’s 60.2. “European economic problems, weaker farm prices and slower global economic growth failed to significantly lower optimism among bankers in our survey regarding the outlook for their local economies,” said Goss.
Home and retail sales: For a second straight month, the June home-sales index rose to a record high at 66.4 from May’s 65.2. The retail-sales index for June slipped slightly to 54.6 from 54.7 in May. “The pace of sales for homes in the area is definitely picking up, much like it is urban areas of the country. As a result of strong farm income over the past couple of years, retail sales continue to expand as well,” said Goss.
Bob Sutter, vice chair of Hilltop National Bank in Casper, Wyo., said, “Housing demand is high and we are seeing an increase in loan demand.”
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.
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 18th straight month, Colorado’s Rural Mainstreet Index (RMI) remained above growth neutral. The index for June declined to a still solid 57.6 from 65.2 in May. The farmland and ranchland price index declined to 62.4 from May’s 77.9. Colorado’s hiring index for June was 57.5, down from May’s 65.3. According to Fred Bauer, president of Farmers Bank in Ault, “Drought is still going on in our area, affecting crops (will have lower yields) and what moisture we have had came with hail in some areas.”
Illinois: For the first time in more than two years, the RMI for Illinois moved below growth neutral. The June RMI slumped to 43.6 from May’s 50.4. Farmland prices remained above growth neutral with a reading of 51.5 from May’s 56.0. The state’s new-hiring index dipped to 50.2 from 50.6 in May.
Iowa: Iowa’s June RMI decreased to 56.1 from 60.2 in May. The farmland price index slipped to 64.6 from May’s 68.7. Iowa’s new-hiring index for June dipped to 58.9 from May’s 59.1. According to Charles Helscher, president of Farmers Savings Bank in Keota, “Early planted corn still looks very good in our area, but we need rain in the next week. Late, or replanted, corn is struggling and predicted high temps with no rain will begin to reduce yield potential.”
Kansas: The Kansas RMI for June slumped to 50.7 from May’s strong 62.1. The farmland price index sank to 59.6 from 70.9 in June. The state’s new-hiring index decreased to 55.6 from May’s 60.5.
Minnesota: The June RMI for Minnesota expanded to 62.1 from 59.8. Minnesota’s farmland price index dipped to 67.4 from 71.6 in May. Minnesota’s new-hiring index advanced to 60.9 from May’s 60.5. Bryan Grove, CEO of American State Bank in Grygla, summarized what many bankers reported for the month, “Recent timely rains in our area were very welcome. Small grain crops are developing nicely with great potential.” Pete Haddeland, CEO of First National Bank in Mahnomen, added that crops in his area look “great.”
Missouri: The RMI for Missouri declined to 48.9 from 51.8 in May. The farmland price index for June slipped to 51.2 from 52.5 in May. Missouri’s new-hiring index slumped to 41.4 from May’s 52.3. Don Reynolds, president of Regional Missouri Bank in Salisbury reported, “Dry weather and poor crop prospects are starting to take a toll on attitudes.”
Nebraska: Growth in Nebraska’s rural economy, while still positive, remains weak. The June RMI for Nebraska rose slightly to 50.9 from 50.1 in May. The farmland price index slipped to 53.4 from 54.2 in May. Nebraska’s new-hiring index advanced to a tepid 51.4 from May’s 49.4. Jim Stanosheck, CEO of State Bank in Odell said, “A two inch rain last night pushed back the doomsday for crops in our area.”
North Dakota: The North Dakota RMI for June declined to a robust and regional high 88.9 from 91.5 in May. The farmland price index expanded to 90.2 from 88.5 in May. North Dakota’s new-hiring index declined to 79.4 from 92.2 in May. North Dakota’s expansion continues and is the healthiest in the region and nation.
South Dakota: The June RMI for South Dakota declined to 49.5 from May’s growth-neutral 50.0. The farmland price index dipped to 51.5 from 57.2 in May. South Dakota's new-hiring index for June dipped 50.2 from 51.4 in May.
Wyoming: The June RMI for Wyoming slumped to 46.8 from 52.3 in May. The June farmland and ranchland price index declined to 53.4 from 58.8 in May. Wyoming’s new-hiring index sank to 51.5 from 52.5 in May. Bob Sutter, vice chair of Hilltop National Bank in Casper, said, “Wyoming’s state revenues are down due to the low natural gas prices, even though the oil exploration continues at a high level. This is due in part to our strong oil and gas exploration infrastructure that is active both in Wyoming and in the North Dakota shale play.”
Next month’s survey results will be released on the third Thursday of the month, July 19.