What is in this article?:
- Farmland Price Growth Slows; Bankers Cautiously Optimistic
- State-by-state outlook
While growth for the rural mainstreet economy remains healthy, it slowed a bit in July.
What a difference a year makes, for some at least. While drought continues to grip some regions in cattle country, ample and sometimes more-than-ample moisture has returned to others.
“Last year at this time, the drought was having a significant negative impact on the rural mainstreet economy. This year, ample moisture has boosted the rural economy and the banker’s economic outlook,” says Ernie Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton University in Omaha, NE.
For the future, bankers’ eyes are on Washington. “More than three-fourths, or 77.9%, of bankers think that congressional passage of a new farm bill is important or crucial to the rural mainstreet economy,” he adds.
Additionally, energy production has become increasingly important in the rural economy. According to Jim Stanosheck, CEO of State Bank of Odell in Odell, NE, “The area has about 45 wind generators being built in the next six months. This activity should spur the rural economy for the next 6-7 months.”
According to a monthly survey of 200 rural bankers in a 10-state region, conditions in rural America are generally good, despite slowing growth in farmland values and predictions for lower farm income this year. Here are the results of the July survey, with 50 indicating growth-neutral.
Farming: The farmland-price index (FPI) declined for the seventh time in eight months, falling to 58.2 in July from June’s 58.4. “FPI has been above growth neutral since February 2010. However, lower farm commodity prices and expected declines in farm income are slowing growth in farmland prices. I expect farmland price growth to continue to weaken as a stronger U.S. dollar weighs on agriculture commodity prices,” Goss says.
This month, bankers were asked to project farm income for 2013. On average, bankers expect farm income to be down 3% from 2012. Among bank CEOs, 59.6% expect farm income to be down from 2012, while 19.5% anticipate an increase in farm income and the remaining 20.9% expected no change.
Farm equipment sales also softened for July, indexing at 50.0, down from June’s 53.2. “Farmers are getting increasingly cautious regarding economic conditions. This has been reflected in declines in our equipment-sales index and in the stock prices of agriculture equipment producers,” Goss reports.
Banking: The loan-volume index moved above growth neutral for July, soaring to 75.7 from June’s 66.7. The checking-deposit index advanced to 53.7 from June’s 48.5, while the index for certificates of deposit and other savings instruments increased to a very weak 42.0 from 33.6 in June.
Community bankers are more upbeat that Congress will address the increasing concentration of U.S. banking. As reported by Pete Haddeland, CEO of the First National Bank in Mahnomen, MN, “TBTF (too big to fail) is gaining some traction (in D.C.).”
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Bankers were also asked about the impact of the federal spending sequester. Only 1.5% reported significant impact, while 34.3% indicated moderate impact; the remaining 64.2% reported no impact from the spending sequestration.
Hiring: July’s new hiring index (NHI) declined to a strong 60.7 from June’s 61.4. “Readings over the past several months are consistent with an annualized growth rate in jobs of 1%. Businesses linked to agriculture and energy continue to add jobs at this slow, but positive pace,” Goss says.
Confidence: The confidence index, which reflects expectations for the economy six months out, fell to 56.6 from 60.0 in June. “While healthy crop conditions have fortified the economic outlook, recent weaker-than-expected agriculture commodity prices have lowered that outlook,” Goss says.
Home and retail sales: The July home-sales index slipped to 76.6 from June’s record high of 78.1. The July retail-sales index slipped to 53.1 from 53.9 in June. “Slightly higher mortgage rates failed to slow the rapidly improving rural mainstreet housing sector,” Goss says.