For the 13th 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.
Overall: The region’s overall reading for December slipped to 66.7 from November’s 67.7. The index ranges between 0 and 100 with a reading of 50.0 representing growth neutral.
“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 20.7% above that for the same period in 2020. This has been an important factor supporting the rural mainstreet economy,” says Creighton University’s Ernie Goss, who conducts the survey.
Todd Douglas, CEO of First National Bank in Pierre, South Dakota, reports, “With the paycheck protection program (PPP) monies, and good commodity prices, even with some areas of reduced yields due to lack of moisture, agriculture borrowers should be in good shape for 2022.”
“Seven of 10 bankers described their local economy as expanding, while only 6.7% indicated that their local economy was in a modest economic downturn,” states Goss.
Farming and ranching: The region’s farmland price index improved to a very strong, and record high of 90.0 from October’s 85.5, also a record high. December’s reading represented the 15th straight month the index has moved above growth neutral.
According to Bank CEOs, annual cash rents for non-irrigated, non-pasture farmland soared to $262 from $218 one month prior to the pandemic in February 2020.
But there were warnings from some bankers. Jeff Bonnett, CEO of Havana State Bank in Havana Illinois, says, “Inflation is real and affecting folks in our service areas.”
Confirming the inflation outlook, Steve Simon, CEO of South Story Bank & Trust in Huxley, Iowa, reports, “Yields and prices ended being up over projections for 2021 but it appears land costs and all crop inputs will be up significantly in 2022.”
The December farm equipment-sales index soared to 74.1 from 62.1 in November. This is the 13th straight month that the index has advanced above growth neutral and the strongest index recorded since April 2011.
Confidence: After declining for five consecutive months, the confidence index, which reflects bank CEO expectations for the economy six months out, rose to 55.2 from 48.4 in November.
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. Goss and Bill McQuillan, former chairman of the Independent Community Banks of America, created the monthly economic survey in 2005 and launched in January 2006.