After advancing above growth neutral last month for the first time since July 2023, the overall Rural Mainstreet Index (RMI) sank below the 50.0 reading in December, 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 plummeted to 39.6 from November’s much stronger 50.2. It was the 11th time this year the overall reading has fallen below growth neutral. The index ranges between 0 and 100, with a reading of 50.0 representing growth neutral.
“In retrospect, and based on bank CEO comments, there appears to have been a significant November upturn resulting from the surprising Trump election results. That positive bump disappeared in December as continuing weak grain prices and farm income losses weighed on a significant proportion of farmers in the region,” says Creighton University’s Dr. Ernie Goss, who conducts the survey.
“Our area farmers continue to be hurt by increased input prices, higher interest rates and low commodity price,” reports Jim Eckert, CEO of Anchor State Bank in Anchor, Illinois
Approximately one in four bankers report their local economy was either currently in a recession or would enter a downturn in 2025. The remaining three of four bankers expect slow growth but no recession for 2025.
Adds Jeff Bonnett, CEO of Havana National Bank in Havana, Illinois: “Based upon reluctance of Congress to pass the FARM Act and assist farmers of all sectors, the continued commodity price crisis will continue into 2025.”
Farming and ranch land prices: For the 7th time in the past eight months, farmland prices sank. The region’s farmland index fell to 41.3 from November’s weak 44.4. “Elevated interest rates and higher input costs, along with below breakeven grain prices for some farmers in the region, have significantly reduced farmer demand for ag land,” notes Goss.
Farm equipment sales: The farm equipment sales index slumped to 14.3, its lowest level since October 2016 and down from 14.6 in November. “This is the 17th straight month the index has fallen below growth neutral. High borrowing costs, tighter credit conditions and weak farm commodity prices are having a negative impact on the purchases of farm equipment,” comments Goss.
Banking: Roughly, 21.7% of bankers indicated that their bank had raised credit standards over the past 12 months.
Confidence: Rural bankers remain pessimistic about economic growth for their area over the next six months. The December confidence index slumped to 37.5 from November’s weak 46.4. “Weak agriculture commodity prices and negative farm cash flow, combined with downturns in farm equipment sales over the past several months, continued to push banker confidence below growth neutral,” comments Goss.
The Rural Mainstreet Index, a real-time analysis of the rural economy, covers 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300.