For a 12th straight month, the overall Rural Mainstreet Index (RMI) sank below growth neutral, according to the August 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 August sank to 40.9 from 41.3 in July -- the lowest reading since November of last year. The index ranges between 0 and 100, with a reading of 50.0 representing growth neutral.
“Weak agriculture commodity prices, sinking agriculture equipment sales and declining farm exports pushed the overall reading below growth neutral for the 12th straight month,” says survey coordinator Dr. Ernie Goss, Creighton University.
Jim Eckert, CEO of Anchor State Bank in Anchor, Ill. states, “The sad part is that most of our farmers will lose money or just break even due to poor commodity prices.”
Other comments from bankers for August:
· Terry Engelken, Vice President of Washington State Bank in Washington, Iowa, reports, “Turkey producers are feeling the pressure from lower prices.”
· Jeff Bonnett, CEO of Havana National Bank in Havana, Ill. says, “Although year-over-year inflation is moving the right direction, the overall increase to inflation since pre-COVID days is taking a toll on rural America. I saw a study that the same items from a pre-COVID grocery receipt purchased here in 2024 went from $125 to over $400 now. By the time working folks in our area pay their utilities, groceries and fill the tank up as needed each month, there is little disposable income left for dining out, entertainment, and small business and crafts shopping.”
· Larry Winum, CEO of Glenwood State Bank in Glenwood, Iowa, reports, “Interesting how the federal debt now exceeds $35 trillion and neither presidential candidate or political party has proposed a plan to solve the problem. Very disappointing and alarming.”
Bankers were asked to compare the current business environment in their area to that prior to Covid-19. Approximately 23% report business conditions were worse while 18% indicate business conditions were improved compared to pre-Covid. The remaining 59% indicate conditions had barely changed.
Farming and ranching land prices: For the third time in the past four months, farmland prices sank. The region’s farmland index fell to 45.5 from July’s 52.2. “Only 9% of bank CEOs report farmland prices expanded from July levels,” says Goss.
Farm equipment sales: The farm equipment sales index for August slumped to 16.7, its lowest since January 2017, and down from July’s 19.0. “This is the 13th straight month the index has fallen below growth neutral. Higher borrowing costs, tighter credit conditions and weak grain prices are having a negative impact on the purchases of farm equipment,” notes Goss.
Despite falling farm commodity prices and farm income, bankers, on average, report loan delinquency rates had increased by only 1% over the past six months.
Bankers were asked to identify the greatest threat to regional banking operations over the next 12 months. Approximately 61% named falling farm commodity prices; 18% identified the Fed’s too high interest rates; 8% reported rising regulatory costs; 6% named low loan demand; and the remaining 8% identified other factors.
Confidence: Rural bankers remain very pessimistic about economic growth for their area over the next six months. The August confidence index slumped to 27.3 from 28.3 in July. “Weak agriculture commodity prices and farm exports, combined with downturns in farm equipment sales over the past several months, continued to constrain banker confidence,” says Goss.
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.