For the 10th straight month, the Creighton University Rural Mainstreet Index (RMI) remained above growth neutral, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.
However, for the fourth straight month, the overall index dropped. The September reading of 62.5 was down from August’s 65.3. The index ranges between 0 and 100 with a reading of 50.0 representing growth neutral.
Approximately, 35.7% of bank CEOs report their local economy expanded between August and September.
“Solid grain prices, the Federal Reserve’s record-low interest rates, and growing exports have underpinned the rural mainstreet economy. USDA data show that 2021 year-to-date agriculture exports are more than 27.6% above that for the same period in 2020. This has been an important factor supporting the rural mainstreet economy,” says Creighton University’s Dr. Ernie Goss, who conducts the survey
“More than eight of 10 bankers expect, if implemented, the stepped-up basis portion of President Biden’s $3.5 trillion bill before Congress to have a negative impact on the rural mainstreet economy,” states Goss.
According to Don Vogel, CEO of Farmers National Bank in Sterling, Illinois, “The loss of stepped-up basis is a significant issue as it relates to farmland being passed on to the next generation.” However, he goes on to say that “If the next generation is going to farm the ground, what the basis is does not matter.” He contends that it is more of an issue for investors.
However, Jeff Bonnett, president of Havana National Bank in Havana, Illinois. was less optimistic saying that, “The stepped-up basis for inherited assets (farmland) is critical to the preservation of the family farm. If approved this will be a game changer for family farms. This proposal will also impact any family-owned small business (Main Street vs. Wall Street) that also has the goal of passing on their business to the next generation.”
Farming and ranching: The region’s farmland price index advanced above growth neutral for a 12th straight month to a record high 85.2 from August’s very strong 76.6.
The September farm equipment-sales index climbed to 66.0 from 64.7 in August. Readings over the last several months represent the strongest consistent growth since 2012.
Confidence: The confidence index, which reflects bank CEO expectations for the economy six months out, increased for the first time since May of this year to 65.4 from August’s 59.7.
“Improving farm exports, healthy agriculture prices, and healthy consumer spending pushed the economic outlook upward. On the other hand, 53.6% of bank CEOs report the Delta variant of Covid-19 was having rising negative economic impact,” notes Goss.
The 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.