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Rural Mainstreet Economy: Farm Equipment Sales Decline Again


Sept 20 - While growth for the Rural Mainstreet economy remains positive, it slowed a bit in September, 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, declined to 52.4 from 55.8 in August. 

“Lower grain prices this year are slowing the growth in the Rural Mainstreet economy. Additionally, 39.4 percent of bankers this month indicated that lower grain prices have encouraged farmers to store grain and hold for higher prices later. This strategy is likely to pay off for the farmer given the Federal Reserve’s decision this week to continue their current stimulus program. This $85 billion per month Fed bond program will be supportive of higher agriculture commodity prices and the farm economy in the months ahead,” said Ernie Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton University. 

According to Scott Tewksbury, CEO of Heartland State Bank in Edgeley, N.D., “We are looking at reduced production for 2013 due to late season drought, which is why I anticipate the economy to be down in the next six months.”

As indicated by Jeff Bonnett, president of Havana National Bank in Havana, Ill., “We do anticipate a significant increase in stored or deferred grain sales from this year’s harvest.”

Farming: The farmland-price index declined for the ninth time in the past 10 months. The September index fell to 54.0 from 55.8 in August. “Our farmland-price index has been above growth neutral since February 2010. However, lower farm commodity prices are slowing growth in farmland prices. The Federal Reserve’s decision to make no changes to their expansionary monetary policy is definitely bullish for agriculture. Most economists, including me, expected the Fed to begin tapering QE3. Thus, the Fed’s lack of action in September will be supportive of agriculture commodity prices, farm income and farmland prices in the weeks and months ahead,” said Goss.

This month bankers were asked how much farmland cash rents expanded in their area over the last year. On average, bankers reported that cash rents grew by 9.9 percent from this time last year. 

Farm equipment sales for September once again declined. The index slumped to 48.3 from 49.2 in August. “Lower agriculture commodity prices are weighing on farmer confidence and their willingness to purchase big ticket items such as agriculture equipment,” said Goss.

Banking: The loan-volume index remained above growth neutral for the month at 73.5,  and up from 70.5 in August. The checking-deposit index advanced to 56.3 from August’s 51.7 while the index for certificates of deposit and other savings instruments increased to a very weak 43.8 from August’s 43.5.  

Hiring: September’s hiring index plunged to 53.2 from August’s strong 59.2. “Despite recent healthy job growth, Rural Mainstreet employment is down by 1.2 percent from pre-recession levels. Solid farm and manufacturing productivity growth have allowed businesses to expand their sales with little accompanying job growth,” said Goss. 

Confidence: The confidence index, which reflects expectations for the economy six months out, slumped to 46.1 from 53.4 in August. “The farm economy continues to grow but is trending lower as agriculture commodity prices have moved lower. This and the uncertainty surrounding passage of the Farm Bill and potential Congressional budget impasses pushed confidence below growth neutral for the month,” said Goss

Bankers remain concerned about the lack of a farm bill. According to Dale Bradley, CEO of The Citizens State Bank in Miltonvale, Kan., “Passage of a good farm bill is important to most farmers.”

Home and retail sales: The September home-sales index declined to a still strong 60.2 from 72.5 in August. The September retail-sales index declined to 49.2 from 52.6 in August. “Higher interest rates slowed housing sales, though sales are still increasing at a healthy pace,” 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 the 12th straight month, Colorado’s Rural Mainstreet Index remained above 50.0. The September RMI declined to a still healthy 57.2 from 63.4 in August. The farmland and ranchland price index fell to a still strong 67.7 from last month’s 70.3. Colorado’s hiring index for September fell to 62.4. Compared to its pre-recession level, Colorado’s Rural Mainstreet employment is currently down by 3.1 percent.  

Illinois: The RMI for Illinois advanced to 52.2 from growth neutral 50.0 in August. The state’s RMI has now remained at or above growth neutral for 12 straight months. Farmland prices slumped to 46.2 from 51.2 in August. The state’s new-hiring index dipped to 47.7 from August’s 52.4. However good weather is boosting the outlook. According to Jim Ashworth, vice chairman of CNB Bank & Trust in Carlinville, “I am expecting good corn and bean yields. Precipitation for the growing season was generally "normal" for first time in five years.” Compared to its pre-recession level, Rural Mainstreet employment in Illinois is currently down by 4.6 percent.

Iowa: The August RMI for Iowa sank to 53.4 from 56.9 in August. The farmland-price index for September was unchanged from August’s 53.2. Iowa’s new-hiring index for rose to 52.7 from August’s 52.4. Compared to its pre-recession level, Rural Mainstreet employment in Iowa is currently down by 2.1 percent.

Kansas: The Kansas RMI for September decreased to 51.7 from 56.4 in August. The farmland-price index for September was unchanged from August’s 48.2. The state’s new-hiring index declined to 49.4 from 53.7 in August. Compared to its pre-recession level, Rural Mainstreet employment in Kansas is 2 percent higher.

Minnesota: The September RMI for Minnesota fell to 51.8 from August’s 54.8. Minnesota’s farmland-price index sank to 39.5 from 40.7 in August. The new-hiring index declined to 43.6 from 48.7 in August. Some portions of the state are being negatively affected by the drought. For example, Pete Haddeland, CEO of First National Bank in Mahnomen, said, “Some crops in our area have been affected by the drought.” Bryan Grove, CEO of American State Bank in Grygla, summarized what many bankers reported for the month, “Soybeans and corn appear stressed within a few miles of Grygla, depending on earlier timely rains. Some areas to our south have had little moisture since early July.” Compared to its pre-recession level, Rural Mainstreet employment in Minnesota is currently down by 2.7 percent.

Missouri: The September RMI for Missouri declined to a still solid 56.8 from August’s 61.4. The farmland-price index for September declined to a regional high of 81.0 from 85.2 in August. Missouri’s new-hiring index sank to 71.3 from August’s 78.4. Compared to its pre-recession level, Rural Mainstreet employment in Missouri is currently down by 9.3 percent.

Nebraska: After moving below growth neutral for January, Nebraska’s Rural Mainstreet Index has been above growth neutral for eight straight months. However, the September RMI declined to 53.0 from 56.2 in August. The farmland-price index for September rose to 48.1 from August’s 47.7. Nebraska’s new-hiring index stood at 49.3, down from 53.4 in August. Compared to its pre-recession level, Rural Mainstreet employment in Nebraska is currently down by 1.3 percent.

North Dakota: The North Dakota RMI for September fell to 56.0 from 58.9 in August. The farmland-price index declined to 70.0 from August’s 73.2. North Dakota’s new-hiring index declined to a still very strong 63.9 from August’s 70.4. Compared to its pre-recession level, Rural Mainstreet employment in North Dakota is currently up by 51.8 percent.

South Dakota: The September RMI for South Dakota slipped to 53.8 from August’s 56.8. The farmland-price index for the state increased to 52.2 from August’s 51.2. South Dakota's new-hiring index for September sank to 52.2 from 55.7 in August. Compared to its pre-recession level, Rural Mainstreet employment in South Dakota is currently up by 1.2 percent. Drought conditions are hurting some areas of the state.  According to David Callies, CEO of Miner County Bank in Howard, “Dry weather has hurt crop yields in our area.”

Wyoming: The September RMI for Wyoming expanded to 53.2 from 53.0 in August. The September farmland and ranchland price index grew to 46.2 from 41.9 in August. Wyoming’s new-hiring index slumped to 48.0 from August’s 49.6. Compared to its pre-recession level, Rural Mainstreet employment in Wyoming is currently up by 0.3 percent.