Monthly survey finds rural economy still positive but slowing with rising costs a key cause for concern. The Creighton University Rural Mainstreet Index (RMI) fell from April’s healthy reading and remained above growth neutral for the 18th straight month, according to the survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.
The region’s overall reading for May declined to 57.7, its lowest reading since February 2021 and down from April’s 62.0. The index ranges between 0 and 100 with a reading of 50.0 representing growth neutral.
“Much like the nation, the growth in the rural mainstreet economy is slowing. Supply chain disruptions from transportation bottlenecks and labor shortages continue to constrain growth. Farmers and bankers are bracing for escalating interest rates — both long-term and short-term,” says Creighton University’s Dr. Ernie Goss, who conducts the survey.
Farming and ranching: The regions’ farmland price index for May sank to a still strong 72.0 from 80.0 in April. This marks the 20th straight month the index has moved above growth neutral. Over the past several months, the survey has registered the most consistent and strongest growth in farmland prices since the survey was launched in 2006.
On average, cash rents have risen 9.6% to $250 per acre for non-irrigated crop land over the past 12 months, according to bankers.
In 2021, the 10-state region exported $10.6 billion of farm commodities, including livestock. Approximately 57.2% of those exports went to Mexico. Despite the rapid rise in the dollar against most currencies, the dollar has depreciated by almost 17% against the Mexican peso. This has made Rural Mainstreet agriculture products more competitively priced in Mexico, Goss observes.
Farm equipment sales: The May farm equipment-sales index declined to 88.9 from April’s 67.6. This was the 18th straight month that the index has advanced above growth neutral. Readings over the past several months are the strongest string of monthly readings recorded since the beginning of the survey in 2006.
Banking: The May loan volume index soared to 73.0 from April’s 51,9. “Escalating costs of farm inputs pushed borrowing up to its highest reading since May 2020,” said Goss.
More than one of ten bankers expect the Federal Reserve to raise rates by 0.75% (75 basis points) at its June meetings. Approximately 70% of bankers anticipate a 0.50% (50 basis points) rate hike at that Fed meeting.
The RMI is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. It 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.