Rural, agriculturally dependent areas continue to show positive economic expansion, a survey of bank CEOs in a 10-state region shows.
The July overall index for the Rural Mainstreet economy remained above growth neutral – which is 50.0 – for a ninth straight month, indicating that the rural, agriculturally dependent areas of the region continue to expand at positive pace, according to this month’s survey of bank CEOs in a 10-state region.
Overall, the Rural Mainstreet Index (RMI), which ranges between 0 and 100, remained solid even though it dipped to 55.7 from June’s 56.0, according to Creighton University economist Ernie Goss, who compiles the index. However, he says even though the Rural Mainstreet economy is expanding, many indicators are trending lower.
• Farming: The farmland price index slumped to 59.4 from June’s 62.0. “Even though this is the 18th straight month the index was above growth neutral, we’re tracking consistent slippage in farmland price growth as the index has declined for three straight months. Consistent with the decline in farmland price growth, the farm equipment sales index sank for the fourth consecutive month to 53.7 from 63.1 in June,” says Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton.
Bankers were asked about ending the blenders’ tax credit for ethanol as a part of U.S. debt reduction. About 68% supported phasing out the credit over the next five years, while 13% indicated it should be maintained at its current level. The remaining 19% supported ending the credit by the end of 2011.
In terms of ag support payments, 35% of bank CEOs supported phasing out ag support payments over five years while an equal 35% indicated that ag support payments for farms with more than $500,000 in revenues should be limited. Almost 9% indicated that the farm support payments should cease by the end of 2011 and 22% supported maintaining payments as they currently exist.
Dan Coup, president of First National Bank in Hope, KS, says that if the government wants to continue with a cheap food policy, payment support needs to remain. “Subsidy on crop insurance premiums is a must,” he says.
• Banking: The loan volume index for July expanded to 66.4 from 59.0 in June. The checking deposit index fell to 52.8 from June’s 59.7 while the index for certificates of deposit and other savings instruments were up, but weak, at 43.7 from 41.7 in June.
• Jobs: After adding jobs for seven straight months, the Rural Mainstreet economy lost jobs, albeit slowly, with a July index of 49.3, down from June’s 51.5. “Supported by continuing strength in the energy and farm sectors, the pace of job growth for the Rural Mainstreet economy remains much stronger than urban areas of the 10-state survey region,” Goss says.
• Confidence: The economic confidence index, which reflects expectations for the economy six months out, slipped to 55.0 from 55.3 in June. “Even though confidence remains fairly robust, flooding and other weather-related issues in areas of the region eroded confidence among some of the bankers,” Goss says.
• Home and retail sales: For the fifth time since June 2010, the home sales index was above growth neutral though the July index was down at 51.4 from 53.0 in June. The retail sales index for July slipped below growth neutral to 47.9, but was up from 47.0 in June. “In terms of retail sales, higher fuel prices and weather related issues restrained retail sales for Rural Mainstreet vendors for July,” Goss says.
The story in the country
Each month, community bank presidents and CEOs in nonurban, agriculturally and energy-dependent portions of the 10-state area are surveyed regarding current economic conditions in their communities and their projected economic outlooks six months down the road. Bankers from Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming are included.
This survey represents an early snapshot of the economy of rural, agriculturally and energy-dependent portions of the nation. The Rural Mainstreet Index (RMI) covers 10 regional states, focusing on 200 rural communities with an average population of 1,300. It gives the most current real-time analysis of the rural economy.
• Colorado: For the seventh straight month, Colorado’s RMI moved above growth neutral. The July reading fell to 55.9 from June’s 56.1. The July farmland and ranchland price index slumped to 58.0 from 62.1 in June and 75.3 in May. Colorado’s new hiring index was 48.8 for July.
• Illinois: The Illinois RMI remained above growth neutral for the 15th straight month, dipping in July to 56.6 from June’s 56.7. Farmland prices are above growth neutral but the reading fell to 58.9 from June’s 63.9. The state’s new hiring index was a healthy 50.6 for July. Jim Ashworth, president of Carlinville National Bank in Carlinville, says, “Projecting the local economy out six months is somewhat difficult given all the uncertainty, but since most grain farmers have pre-priced much of their production, there should be a boost.”
• Iowa: Iowa’s RMI climbed to 58.7 from June’s 56.6. The farmland price index slumped to a strong 59.0 from June’s 63.6. Iowa’s new hiring index for July was a weak 49.9.
• Kansas: The Kansas RMI was above growth neutral 50.0 for the month. The index dipped to 55.4 from 55.7 in June. The farmland price index sank to 56.7 from June’s 61.3. The state’s new hiring index was a weak 47.6 for July. Dale Bradley, CEO of The Citizens State Bank in Miltonvale, reports, “The economy is very unstable and fragile at this time. Several corrections need to be made before the overall economy can improve and we can then all gain more confidence in our future.”
• Minnesota: Minnesota’s July RMI increased to 57.3 from 56.4 in June. Minnesota’s farmland price index fell to 58.8 from June’s 63.0. The state’s new hiring index was a weak 49.7. Pete Haddeland, CEO of First National Bank in Mahnomen, says crops “have turned around very well in the last several weeks and are looking great.”
• Missouri: Missouri’s RMI expanded to 55.3 from 51.3 in June, while the farmland price index slumped to 56.5 from 60.5 in June. The state’s new hiring index was a regional low 47.3 from July. Alden Buerge, CEO of First State Bank in Joplin, reports continuing housing shortages and an upturn in retail sales resulting from spring tornados.
• Nebraska: The July RMI for Nebraska fell to 56.8 from 57.2 in June. The farmland price index declined to 56.8 from 65.0 in June. The state’s new hiring index stood at 51.2 for July. John Nelsen, president of First Tier Bank in Holderege, says that with land, equipment and input costs skyrocketing, “the current commodity prices have given us a false sense of security. More mature farmers will be reminded of the 1980s and the young farmers will have to learn.”
• North Dakota: The North Dakota July RMI fell to a regional high 58.9 from 59.3 in June, and the farmland price index fell to 65.5 from 71.3 in June. The state’s new hiring index was a healthy 56.4. Scott Tewksbury, CEO of Heartland State Bank in Edgeley, says severe weather outbreaks and excessive rain have “had some impacts on area farms.”
• South Dakota: For a ninth straight month, the RMI for South Dakota was above growth neutral. The index for July slipped to 55.7 from 56.3 in June. The farmland price index plunged to 57.6 from June’s 62.7. South Dakota's new hiring index for July was 48.4.
• Wyoming: The Wyoming RMI for July climbed to 57.4 from 56.4 in June. The July farmland and ranchland price index sank to 58.8 from 63.1 in June. The state’s new hiring index was a weak 49.6 for July. Kent Shurtleff, CEO of Wyoming National Bank in Riverton, says that cow and calf producers “should fare pretty well this season. Cow wintering costs will be crucial for 2012.”