Reduce liability for losses on commercial accounts by adhering to four requirements.
Rural Mainstreet Index Remains Healthy: Bankers Expect Modest Impact from 2013 Drought
Jan 18 - After declining during the summer drought, the Rural Mainstreet economy in January remained above growth neutral for a fourth straight month according to the monthly survey of bank CEOs in a 10-state area.
Overall: The Rural Mainstreet Index, which ranges between 0 and 100 with 50.0 representing growth neutral, dipped to a still solid 55.6 for January from December’s healthier 60.6. Over the past three years the RMI has averaged 55.8.
Creighton University economist Ernie Goss said, “Our survey results indicate that the Rural Mainstreet economy continues to expand at a moderate pace. Rural, agriculturally dependent communities in the region appear to have shed the negative impacts of the 2012 drought.”
However, some bankers expect the national economy to weigh on the region. According to Dale Bradley, CEO of The Citizens State Bank, in Miltonvale Kan., “A downturn in the overall economy will also affect our farm economy. I expect both to be negative for 2013.”
Likewise, Jim Eckert president of Anchor State Bank in Anchor, Ill., reported that small town businesses are signaling that the recession is not over.
Farming: After rising above 80 for two straight months, the farmland-price index slumped to a still healthy 71.5 from December’s 82.5 and November’s 83.9. This is the 36th consecutive month that the farmland-price index has risen above growth neutral. The farm equipment-sales index declined to a solid 63.8 from 67.0 in December. “Despite continuing drought conditions in much of the region, growth in farmland prices, cash rents and farm equipment sales remains strong,” said Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton.
Jeff Bonnett, president of Havana National Bank in Havana, Ill., reported, “The drought had little impact since most of our crops are irrigated and farmland that is not irrigated is covered by disaster crop insurance programs.”
Bryan Grove, president of American State Bank in Grygla, Minn, said,“ Although 2012 was much drier than normal in our region of northwest Minnesota, crops were excellent, resulting in great financial progress for agriculture producers. Subsoil moisture is depleted and 2013 will require timely rains.”
This month bankers were asked the impact of continuing drought conditions on the Rural Mainstreet economy. “Contrary to my expectations, more than 60 percent of bankers anticipate only a moderate negative to no impact if the drought continues for 2013. Furthermore, approximately 80 percent of bank CEOs report the drought has had no impact on farmland prices,” said Goss.
When asked about sustaining economic damages from a continuation of the drought for 2013, a majority, or 50.8 percent, expects livestock producers to be the most negatively affected. Approximately 38.1 percent of the bankers anticipate that crop farmers will sustain the largest negative impacts. Approximately 11.1 percent of Bank CEOs expect business linked to agriculture and ethanol producers will experience the most negative impacts by a 2013 drought.
Banking: For the third time in the past four months, the loan-volume index moved below growth neutral. The index plummeted to 39.0 from December’s strong 62.1 and November’s weak 47.8. The checking-deposit index advanced to 78.1 from 75.8 in December, while the index for certificates of deposit and other savings instruments rose to 42.2 from December ‘s 40.2. “Banking data appear to indicate that the 2012 drought did not weaken, to any great extent, the financial positions of farms and businesses in the region,” said Goss.
Hiring: January’s hiring index slipped to 52.4 from 53.5 in December. “New hiring in the region continues at a modest pace,” said Goss.
Confidence: The confidence index, which reflects expectations for the economy six months out, was unchanged from December’s 55.5. “Bankers are reporting healthy current economic growth and expect this growth to remain strong for the first half of 2013,” said Goss.
Home and retail sales: The January home-sales index slipped to a solid 55.6 from 61.3 in December. The January retail-sales index tumbled to 44.5 from December’s 59.0.
Each month, community bank presidents and CEOs in nonurban, agriculturally and energy-dependent portions of a 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 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. Goss and Bill McQuillan, president of CNB Community Bank of Greeley, Neb., created the monthly economic survey in 2005.
Colorado: For a fourth straight month, Colorado’s Rural Mainstreet Index moved above 50.0. The January RMI climbed to 64.1 from December’s 55.9. The farmland and ranchland-price index dipped to 70.6 from December’s 70.7. Colorado’s hiring index for January expanded to 50.0 from December’s 44.9.
Illinois: For a fourth consecutive month, the RMI for Illinois remained above growth neutral. The January index declined to 61.3 from December’s 65.2. Farmland prices tumbled to a still healthy 76.7 from December’s 84.2. The state’s new-hiring index increased to 54.1 from 53.9 in December.
Iowa: The January RMI for Iowa slipped to 59.0 from December’s 63.6. The farmland-price index declined to 75.4 from December’s 84.2. Iowa’s new-hiring index for January dipped slightly to 53.2 from December’s 53.9. Jim Brown, CEO of Hardin County Savings Bank in Eldora reported, “Strong earnings, working capital and net worth increases are still the norm, thus the continued increase in land values in Central Iowa.”
Kansas: The Kansas RMI for January tumbled to 53.7 from December’s 67.7. The farmland-price index sank to 75.4 from 82.6 in December. The state’s new-hiring index declined to 48.5 from 52.8 in December.
Minnesota: The January RMI for Minnesota rose to 71.2 from 69.6 in December. Minnesota’s farmland-price index declined to 85.1 from 87.7 in December. Minnesota’s new-hiring index advanced to 59.7 from December’s 56.2 from November’s 53.2. Pete Haddeland, CEO of First National Bank in Mahnomen, said, “The drought has had little effect in northern Minnesota.”
Missouri: The January RMI for Missouri sank to 51.5 from December’s 58.7. The farmland-price index decreased to 67.8 from December’s 72.2. Missouri’s new-hiring advanced to 48.2 from 45.9 in December.
Nebraska: For the first time since September, Nebraska’s Rural Mainstreet economy moved into negative territory. The January RMI slumped to 48.8 from December’s 57.4. The farmland-price index slipped to 66.2 from 84.6 in December. Nebraska’s new-hiring index sank to 47.1 from December’s 54.2. Rick Clements, president of American Exchange Bank in Elmwood, said, “Higher crop prices and crop insurance revenue coverage with low interest rates have made land prices increase dramatically.”
North Dakota: The North Dakota RMI for January decreased to a regional high of 83.3 from December’s 88.3. The farmland-price index advanced to 85.2 from December’s 84.5. North Dakota’s new-hiring index decreased to 78.3 from December’s 84.9.
South Dakota: The January RMI for South Dakota declined to 53.5 from December’s 61.3. The farmland-price index decreased to 71.0 from December’s 81.6. South Dakota's new-hiring index for January slipped to 50.3 from 52.2 in December.
Wyoming: The January RMI for Wyoming declined to 54.8 from 59.1 in December. The January farmland and ranchland-price index decreased to 70.5 from December’s 80.6. Wyoming’s new-hiring index declined but remained above growth neutral with a January reading of 51.0, down from December’s 51.5.