For a fourth straight month, the overall Rural Mainstreet Index (RMI) sank below growth neutral, according to the December 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 rose to 41.7 from 40.4 in November. The index ranges between 0 and 100, with a reading of 50.0 representing growth neutral.
“Higher interest rates and a credit squeeze are having a significant and negative impact on Rural Mainstreet businesses. Approximately 13.3% of bank CEOs indicate that their local economy was already in a recession while another 43.3% expect a recession in early 2024,” says Creighton University’s Dr. Ernie Goss, who conduct the survey.
Jim Eckert, CEO of Anchor State Bank in Anchor, Ill. says, “Most farm incomes in our area will be down this year, especially due to low corn prices. But most of our farmers are coming off good years and will be all right.”
When asked to name the greatest 2024 economic threat for community banks, approximately four of 10 identified a downturn in farm income as the chief 2024 hazard.
Farming and ranching land prices: The region’s farmland price index increased to 67.2 from November’s 66.7. “Creighton’s survey continues to point to solid, but slowing, growth in farmland prices. Approximately, 41.4% of bankers reported that a downturn in farm income was the greatest threat to community banks in 2024,” states Goss.
Farm equipment sales: The farm equipment-sales index for December was unchanged from November’s weak 49.5. “This is the sixth time in the past seven months the index has fallen below growth neutral. Higher borrowing costs and tighter credit conditions are having a negative impact on the purchases of farm equipment,” notes Goss.
“For a third consecutive month, several bankers voiced concerns over economic losses of pork producers in their area,” says Goss.
Matthew Brown, Vice President of Ag & Commercial Banking with CBI Bank and Trust in Washington, Iowa, states, “Still seeing significant stress with hog integrators in the area.”
Echoing the concern for hog operations, Terry Engelken, Vice President of Washington State Bank in Washington, Iowa, reports, “Hog finishers are still losing money. The lower corn price is improving the situation.”
Banking: The December loan volume index soared to 80.9 from 57.9 in November and from October’s 77.7. The checking deposit dropped to a very weak 41.4 from November’s 56.0. This is the tenth time in 2023 that the index has fallen below growth neutral. The index for certificates of deposits and other savings instruments expanded to a healthy 65.5 from 58.0 in November.
Larry Winum, CEO of Glenwood State Bank in Glenwood, Iowa, reports, “Glad to see the Federal Reserve tap the brakes on raising interest rates. Time to pause and see how the economy reacts to the current rate environment. (It) will be interesting to see if they actually achieve a soft landing.”
Confidence: Even though the confidence index climbed to 43.3 from November’s record low 21.2, higher interest rates, deposit outflows and a slowing farm economy over the past several months continued to constrain business confidence.
The survey represents an early snapshot of the economy of rural agriculturally- and energy-dependent portions of the nation. The Rural Mainstreet Index is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. The index provides 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 and launched it in January 2006.