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Low supplies and high prices for corn and soybeans are forcing ethanol and biodiesel plants to reduce production or shut down completely.
July RMI results
Here are the results of the most recent RMI survey:
Confidence:The confidence index, which reflects expectations for the economy six months out, plummeted to 40.9 from June’s 58.5, the largest one-month decline recorded since the monthly survey began in December 2005. “The drought has turned economic optimism into economic pessimism,” Goss says.
Farming: The July survey shows farmland prices continue to head higher but at a much slower rate. However, for a third straight month, farmland price growth weakened with the July index dropping to 58.6, its lowest level since September 2010 and down from last month’s 60.0.
Even so, this is the 30th consecutive month the index has been above growth neutral, Goss says. However, the farm equipment sales index sank to 46.1, its lowest level since March 2009, and was down significantly from last month’s 54.7.
“Much weaker economic conditions are slowing growth in farmland prices. Furthermore, farmers are clearly reducing their purchases of agriculture equipment. This pullback will soon affect urban areas of the region,” Goss says.
Banking: Farmers increased their demand for loans with the loan volume index climbing to 65.3 from June’s 64.2, the fifth consecutive month the index has risen. Of the bank CEOs, 29% indicated that drought conditions had increased farmer borrowing. “The drought appears to be increasing the financial needs of farmers in the region. We have been tracking a reduction in the percent of farmland and farm equipment cash sales and upturns in the degree of bank financing,” Goss says.
Hiring: July’s hiring index declined to 52.8 from June’s 59.1. “Even though we tracked hiring growth for the month, the index was down for June. I expect hiring to drift lower with job losses in the months ahead as the impacts of the drought spread,” Goss reports.
Home and retail sales: The July home sales index declined to a solid 58.6 from June’s record high 66.4, while the retail sales index for July sank to 44.4 from June’s 54.6. “The pace of sales for homes in the area remains positive. On the other hand, drought conditions hammered retail sales for the month,” Goss says.