For a 14th straight month, the overall Rural Mainstreet Index (RMI) sank below growth neutral, according to the October 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 October sank to 35.2 from 37.5 in September. It was the lowest reading since the beginning of the pandemic in spring 2020. The index ranges between 0 and 100, with a reading of 50.0 that represents growth neutral.
“Weak agriculture commodity prices, sinking agriculture equipment sales, elevated input costs and falling farmland prices pushed the overall reading below growth neutral for the 14th straight month,” states Dr. Ernie Goss, Creighton University, who conducts the survey.
Bank CEOs were asked which presidential candidate would be the most supportive of the rural mainstreet economy. Approximately 85% indicated form President Trump would be the most supportive of the rural economy with 4% Vice-President Harris and the remaining 11% indentifying another candidate.
About 61.5% of bankers indicate the financial position of farmers in their service area had deteriorated over the past six months. The remaining 38.5% report farmers’ financial position was unchanged over the past six months.
Jeff Bonnett, CEO of Havana National Bank in Havana, Illinois, says, “Not to sound like a broken record, but even with above average yields on corn and soybeans, most local farm producers will still cash flow at less than break-even prices.”
Other comments from bankers for October:
· Terry Engelken, Vice President of Washington State Bank in Washington, Iowa, reports “Corn and soybean yields are excellent.”
· Jim Eckert, CEO of Anchor State Bank in Anchor, Illinois, states, “Yields are surprisingly good in our area, considering the dry conditions we had most of the late growing season. Field and combine fires are very common, due to continued dry conditions.”
· Anonymous banker/farmer, “We cannot survive doing grains at these price levels. Cattle helps, but few have cow/calf operations where there are good margins. I am not so optimistic about these markets.”
Farming and ranching land prices: For the fifth time in the past six months, farmland prices sank. The region’s farmland index fell to 38.5, a six-year low, from September’s 43.8. “Elevated interest rates and higher input costs along with below breakeven grain prices have significantly reduced farmer demand for ag land,” notes Goss.
On average, bank CEOs report that over the past six months, only 18.1% of farmland buyers were non-farmer investors.
Farm equipment sales: The farm equipment sales index for October slumped to 18.8 from 19.0 in September. “This is the 15th straight month the index has fallen below growth neutral. Higher borrowing costs, tighter credit conditions and farm income losses are having a negative impact on the purchases of farm equipment,” says Goss.
Confidence: Rural bankers remain very pessimistic about economic growth for their area over the next six months. The October confidence index increased to a weak 29.6 from September’s 22.9. “Weak agriculture commodity prices and negative farm cash flow, combined with downturns in farm equipment sales over the past several months, continue to constrain banker confidence,” states 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 that covers 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.