For a 13th straight month, the overall Rural Mainstreet Index (RMI) sank below growth neutral, according to the September 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 September sank to 37.5 from 40.9 in August. 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 and elevated input costs pushed the overall reading below growth neutral for the 13th straight month,” say Dr. Ernie Goss, Creighton University, who conducts the survey.
Jim Eckert, CEO of Anchor State Bank in Anchor, Illinois, states, “Harvest has not really started in our area, but a couple of farmers (who always have to be first) have combined some early corn varieties, and the results suggest the crop will be good but down from 2022 and 2023.”
Other comments from bankers for September:
Terry Engelken, Vice President of Washington State Bank in Washington, Iowa, reports “Early yields for both corn and soybeans are very good.”
Jeff Bonnett, CEO of Havana National Bank in Havana, Illinois, states, “The question regarding what percent of our area farmers will have a net loss for 2024 is interesting. Based upon current corn and soybean prices of about $1.50 to $2.00 below break even, I believe this will be a high percentage.”
Farming and ranching land prices: For the fourth time in the past five months, farmland prices sank. The region’s farmland index fell to 43.8 from August’s 45.5. “Only 4.2% of bank CEOs report farmland prices expanded from August levels,” notes Goss.
On average, bank CEOs expect farmland prices to decline by 5.3% in the next 12 months. “Of greater concern, approximately one-fourth of bankers anticipate a 10% to 20% downturn in farmland prices over the next year,” cautions Goss.
Farm equipment sales: The farm equipment sales index for September increased to 19.0 from 16.7. “This is the 14th straight month that the index has fallen below growth neutral. Higher borrowing costs, tighter credit conditions and negative farm income are having a negative impact on the purchases of farm equipment,” says Goss.
Across the region, bankers expect approximately 39.1% of farmers to experience negative 2024 farm income.
Confidence: Rural bankers remain very pessimistic about economic growth for their area over the next six months. The September confidence index slumped to 22.9, its lowest level since November of last year, and down from 27.3 in August. “Weak agriculture commodity prices, negative farm cash flow, combined with downturns in farm equipment sales over the past several months, continued to constrain banker confidence,” comments 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.