Farm income continues to be the big driver of the rural mainstreet economy. According to Larry Winum, president of Glenwood State Bank in Glenwood, IA, “Agriculture had another strong year with all indications that 2012 will continue to be positive for farmers.”

The Rural Mainstreet Index (RMI), which ranges between 0 and 100, dipped a bit from January’s very strong level, declining to 59.6 from January’s 59.8. Despite the strong February numbers, we expect to see a bit slower growth in farm income as a result of somewhat softer agriculture commodity prices and higher input prices. This will dampen growth for the rural mainstreet economy for 2012. However, growth will continue to be healthy but won’t match 2010-2011 expansion.

Here’s a look at a few specific areas:

Farming: After falling in January from December’s record level, farmland prices once again headed higher. The Farmland Price Index (FPI) for February climbed to 75.0 from 74.3 in January and down from December’s 84.1. This is the 25th straight month FPI has been above growth neutral. The farm equipment sales index sank to a still robust 63.4 from January’s 72.3.

No downturn in growth rates for farmland prices and other factors tied to agriculture have been detected as yet. I’m concerned that any significant slump in agriculture commodity prices or an increase in interest rates could take a lot of the air out of the farmland price bubble.

When asked to forecast 2012 farmland prices, 21% of the bankers surveyed expect them to expand by more than 6%, while 46% forecast a 1-5% growth. Meanwhile, 25% anticipate no change in farmland prices for 2012, while 8% expect to see a decline.

In the interest of federal deficit reduction, bankers were asked what changes to federal ag support payments they would back. Only 10% supported eliminating ag subsidies in 2012, but 41% said they’d support a phase-out over five years. Another 25% thought there should be no change to the current payment system, and 24% supported limiting ag subsidies to farms of less than $500,000 in revenues.

Banking: Very strong cash balances among farmers continue to weaken loan demand. The loan volume index for February slumped to 31.2 from January’s 45.5 and December’s 50.8. The checking deposit index dipped to a very healthy 64.5 from 68.2 in January, while the index for certificates of deposit and other savings instruments climbed to a tepid 50.0 from January’s weaker 47.8.  

Hiring: February’s new hiring index (NHI) rose to 53.7 from January’s 51.5. Year-over-year job growth for rural mainstreet communities is almost double that for urban areas of the region.

Confidence:  The economic confidence index, which reflects expectations for the economy six months out, rose to 60.3 from January’s 56.1. Improving national economic reports are clearly and positively affecting the economic outlook of bankers in our survey.

Home and retail sales:  For the first time since July 2011, the rural mainstreet home sales index climbed above growth neutral with a February reading of 51.5, up from January’s 49.2. The retail sales index for February sank to 50.0 from January’s 51.5. Very healthy farm income has yet to translate into consistent healthy retail sales and home sales for rural mainstreet merchants.

State-by-state outlook


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) is a unique index covering 10 regional states, focusing on approximately 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 14th straight month, Colorado’s RMI remained above growth neutral, but declined in February to a still solid 54.7 from January’s 72.7. The FPI sank to 67.8 from 78.9 in January. Colorado’s NHI for February was 51.0, down from January’s 65.8. Year-over-year job growth: urban, 0.5%; rural mainstreet, 4.7%.   

Illinois: Illinois’ RMI remained above growth neutral for the 22nd straight month, though the February RMI sank to 53.9 from January’s 61.1. Farmland prices remained significantly above growth neutral with a reading of 80.1, up from 77.7 in January. The state’s NHI dipped to 50.5 from January’s 55.5. Year-over-year job growth: urban, 0.4%; rural mainstreet, 2.9%.   

Iowa: Iowa’s February RMI advanced to 57.9 from 57.3 in January. FPI dipped to 68.1 from January’s 68.2. Iowa’s NHI for February slipped to 51.2 from 51.4 in January. Larry Winum, president of Glenwood State Bank in Glenwood, said, “Loan demand and housing activity remain extremely slow.” Year-over-year job growth: urban, 0.5%; rural mainstreet, 1.3%.   

Kansas: The Kansas RMI advanced to 55.5 from 52.6 in January. FPI climbed to 68.6 from 62.6 in January, while the state’s NHI grew to 51.5 from 47.9 in January. However, Dale Bradley, CEO of the Citizens State Bank in Miltonvale, argued, “High oil prices do not bode well for a struggling U.S. economy.” Year-over-year job growth: urban, 1%; rural mainstreet, 0.8%.   

Minnesota: The February RMI rose to 56.2 from 49.9 in January. Minnesota’s FPI bounced to 69.3 from January 57.8, and its NHI rose to 52.0 from January’s 45.5. Year-over-year job growth: urban, 1%; rural mainstreet, 0.9%.   

Missouri: The RMI for Missouri jumped to 54.3 from January’s weak 47.8. February FPI advanced to 67.3 from January’s 52.2, while Missouri’s NHI inched higher to 50.7 from 50.6 in January. Year-over-year job growth: urban, 0.6%; rural mainstreet, -3.9%.    

Nebraska: The February RMI for Nebraska rose to 61.7 from 58.8 in January. FPI jumped to 79.2 from 73.5 in January, and NHI advanced to 55.6 from 53.4 in January. Year-over-year job growth: urban, 1.7%; rural mainstreet, 0.8%.   

North Dakota: The North Dakota RMI for February declined to a still strong 67.0 from January’s regional high 87.2. FPI advanced to 80.1 from January’s 74.2, while NHI slipped to 59.2 from January’s 78.7. Year-over-year job growth: urban, 2.9%; rural mainstreet, 10.3%.   

South Dakota: The February RMI for South Dakota grew to 57.1 from 51.2 in January, with FPI bouncing to 70.2 from January’s 60.1, and NHI advancing to 52.6 from 46.7 in January. Year-over-year job growth: urban, 1.3%; rural mainstreet, 1.7%.   

Wyoming: The February RMI for Wyoming jumped to a regional high of 72.5 from January’s 59.0. February FPI bounced to 85.6 from 73.9 in January, while NHI advanced to 59.0 from January’s 53.6. Year-over-year job growth: urban, 3.5%; rural mainstreet, 1.7%.