March 26 - Growth continued for the Rural Mainstreet economy during March according to the latest 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 healthy 56.9 from February’s 58.2. “Very healthy farm income continues to boost the Rural Mainstreet economy though growth has slowed a bit,” said Creighton University economist Ernie Goss.
However, more and more bankers are concerned about recent strong growth. For example, Dale Bradley, CEO of The Citizens State Bank in Miltonvale, Kan., said, “I still think we are on the bubble.”
Farming: The farmland price index expanded slightly to a strong 67.2 from February’s 67.0. This is the 40th consecutive month that the farmland-price index has been above growth neutral. “Current readings are consistent with farmland price growth between 12 and 16 percent. The farm equipment-sales index declined to 60.5 from 65.8 in February. The Federal Reserve’s cheap money policies continue to bolster farm commodity prices, farm income, farmland prices and farm equipment sales. The Fed has indicated little change in this pro-agriculture money policy for 2013, which means we will likely continue to see healthy growth in farmland prices and farm equipment sales,” said Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton.
This month bankers were asked several questions related to agriculture conditions in the region. First, they were asked how much they expected the cost of farm/ranch inputs, such as fertilizer, to increase for 2013. On average, bankers anticipate growth of 6.5 percent from last year’s levels. Jeff Bonnett president of Havana National Bank in Havana, Ill., said he and his bank officers were expecting a 9 percent growth from 2012 levels.
Second, bankers were asked how much growth they expected in agriculture land rents for 2013. A 9.3 percent increase in cash rents for farmland is expected for 2013.
Finally, bankers were asked to gauge the growth in the financing of farmland purchases over the past two to five years. Approximately 3.2 percent of bank CEOs indicated they were seeing the highest expansion in the financing of farmland in decades. Approximately 52.4 percent of bankers indicated an increase in the financing of farmland. Another 19 percent reported no change in the percentage of farmland purchases that were financed, while 28.6 percent indicated a reduction in financing of farmland sales (i.e. an increase in cash sales).
According to Michael Flahaven, president of Wenona State Bank in Wenona, Ill., “Farmland financing has increased at our bank. However, after talking with other bankers, I think we are the exception.”
Banking: The loan-volume index moved above growth neutral for the month. The index rose to a tepid 51.5 from February’s weak 46.7. The checking-deposit index advanced to a robust 70.5 from 67.2 in February, while the index for certificates of deposit and other savings instruments sank to 42.4 from last month’s 47.6. “Banking data continue to reflect healthy farm income and an expanding Rural Mainstreet economy,” said Goss.
Hiring: March’s hiring index slipped to 59.4 from 54.9 in February but higher than January’s 52.4. “The growth rate in new hiring has been trending upward. Since the beginning of 2011, Rural Mainstreet companies have been adding new workers. However, the pace of that new hiring began to increase in October of 2012,” said Goss.
Confidence: The confidence index, which reflects expectations for the economy six months out, strengthened a bit to 52.3 from 51.7 in February. “The failure of Washington to pass a new farm bill continues to weigh on the Rural Mainstreet economic outlook,” said Goss.
Additionally, weather concerns remain an issue. David Callies, CEO of Miner County Bank in Howard, S.D., reported, “Continued drought (is) still the biggest concern.”
Home and retail sales: For a second straight month the homes-sales index took a large positive jump. The March home-sales index soared to 69.2 from February’s 65.0. The March retail-sales index advanced to 51.6 from 46.6 in February and January’s 44.5. “Rural Mainstreet consumers remain very cautious in terms of their retail purchases,” said Goss.
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 sixth straight month, Colorado’s Rural Mainstreet Index moved above 50.0. The March RMI rocketed to 75.2 from 61.1 in February. The farmland and ranchland price index expanded to 71.2 from February’s 70.2. Colorado’s hiring index for March expanded to 67.8 from 54.6 in February.
Illinois: While the RMI for Illinois declined in March it remained above growth neutral for the sixth consecutive month. The March index declined to 56.9 from February’s 61.4. Farmland prices declined to 68.1 from February’s 71.2. The state’s new-hiring index increased to 57.1 from last month’s 55.3. In contrast, Jim Eckert, president of Anchor State Bank in Anchor, said, “Area small towns are in decline and small businesses are not doing well. Reduction of hours at rural post offices has affected the ability to do business and caused additional declines in customer traffic.”
Iowa: The March RMI for Iowa advanced to 65.2 from February’s 59.8. The farmland-price index declined to 66.7 from 70.4 in February. Iowa’s new-hiring index for March improved to 61.3 from February’s 54.7.
Kansas: The Kansas RMI for March rose to 52.8 from 47.2 in February. The farmland-price index climbed to 69.1 from February’s 60.0. The state’s new-hiring index expanded to 57.8 from 47.8 in February.
Minnesota: The March RMI for Minnesota declined to a strong 66.8 from February’s 73.4. Minnesota’s farmland-price index sank to 72.1 from February’s 83.3. The new-hiring index fell to 59.8 from February’s 63.3.
Missouri: The March RMI for Missouri decreased to 56.3 from February’s 64.5. The farmland-price index for March climbed to 74.1 from February’s 67.5. Missouri’s new-hiring soared to 61.1 from 52.8 in February.
Nebraska: After moving below growth neutral for January, Nebraska’s Rural Mainstreet index broke above growth neutral for two straight months. The March RMI expanded to 54.9 from February’s 52.7. The farmland-price index advanced to 65.4 from 60.7 in February. Nebraska’s new-hiring index increased to 58.0 from February’s weak 48.3. Said Bill McQuillan, president of CNB Community Bank of Greeley, “Our pastures were 75 percent moisture deficient from our average rainfall during 2012 because of the drought. We will need at least 20 inches of rain this year before we will be able to utilize our livestock pastures.”
North Dakota: The North Dakota RMI for March decreased to 61.2 from February’s regional high of 78.9. The farmland-price index declined to a robust 79.8 from 86.4 in February. North Dakota’s new-hiring index decreased to 63.4 from 75.1 in February.
South Dakota: The March RMI for South Dakota improved to 58.8 from February’s 54.1. The farmland price index decreased to 62.4 from 65.0 in February. South Dakota's new-hiring index for March advanced to 58.4 from 51.1 in February.
Wyoming: The March RMI for Wyoming declined to 52.8 from 54.1 in February. The March farmland and ranchland price index decreased to 61.8 from 64.6 in February. Wyoming’s new-hiring index climbed above growth neutral with a March reading of 53.9, which was up from February ‘s 51.9.