Jan 17 - Growth for the Rural Mainstreet economy plummeted, according to the January 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, fell to 50.8 from December’s much healthier to 56.1.
“The overall index for the Rural Mainstreet Economy continues to indicate that the areas of the nation highly dependent on agriculture and energy continue to expand at a positive but slower pace. Over the past year, corn, soybean and wheat prices have declined by 41 percent, 10 percent and 16 percent, respectively. Weaker farm prices are clearly negatively influencing the rural economy. Additionally, almost 80 percent of bank CEOs expect the EPA’s cut in ethanol blending level to negatively affect the Rural Mainstreet economy,” said Ernie Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton University.
Farming and ranching: The farmland and ranchland-price index plunged to 43.8, its lowest level since October 2009, and was down from December’s 47.0. “This is the second straight month that the farmland and ranchland-price index has moved below growth neutral. As agriculture commodity prices have moved lower, so have farmland prices. On the other side of the economic coin, ranchers and livestock producers are experiencing record prices and a very healthy economic outlook,” said Goss.
Farm equipment sales remained below growth neutral for the seventh straight month. The January index sank to a weak 41.0, the lowest reading since October 2009, and down from December’s 44.3. “Over the past year, commodity prices for all farm products have declined by roughly 8 percent. This has significantly reduced farmers’ willingness to undertake major agriculture equipment purchases,” said Goss.
Scott Tewksbury, CEO of Heartland State Bank in Edgeley, N.D., said, “Reduced commodity price outlook for 2014 together with reduced 2013 yields have damped demand for capital purchases and slowed the rush to rent added land at any price.”
Banking: The loan-volume index declined to 57.8 from 66.7 in December. The checking-deposit index climbed to 68.2 from December’s 66.0, while the index for certificates of deposit and other savings instruments increased to 41.6 from December’s frail 37.2.
Jim Ashworth, president of Carlinville National Bank in Carlinville, Ill., reported, “There was a flurry of activity near year-end by grain farmers structuring their 2013 income and taxes, paying ahead for inputs and equipment upgrades.”
This month bankers were also asked when the Federal Reserve should end its $85 billion monthly bond-buying program. Almost one of six bankers think the program should be ended by the middle of 2014, or well ahead of the Fed’s recently announced schedule. Almost one-half of the bankers, or 47.7 percent, recommend that the Fed adjust the monthly bond-buying program as incoming economic data dictate.
Hiring: Rural Mainstreet businesses continue to hire. The January hiring index declined to a still solid 53.8 from 56.9 in December. “Businesses in rural areas of the region continue to add jobs. In fact, the region is now only slightly below the level achieved shortly before the national recession began in December 2007,” said Goss.
We asked bank CEOs their recommendation for extending long-term unemployment benefits. The bankers were less than enthusiastic with 62.5 percent indicating that they should not be extended. For bankers endorsing the extension, 29.7 indicated that any benefit expansion should be matched with cuts elsewhere in the budget. Only 7.8 percent recommended extending with no conditions.
Confidence: The confidence index, which reflects expectations for the economy six months out, rose to a still weak 49.2 from December’s 47.0. “Despite the recent Congressional agreements on budget items, the lack of a farm bill and lower agriculture commodity prices restrained economic confidence,” said Goss
It is not just corn prices but also available supply that concerns bankers. David Callies, CEO of Miner County Bank in Howard, S.D., said, “There is major concern for the coming year on ag cash flow because of low corn prices and high corn inventory.”
Home and retail sales: The January home-sales index fell below growth neutral to 49.3 from December’s 53.1 and November’s even stronger 56.2. The January retail-sales index sank to a fragile 46.2 from December’s much healthier 54.7. “Higher mortgage rates and lower agriculture commodity prices cooled rural housing and retail sales strength significantly,” 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. The survey is supported by a grant from Security State Bank in Ansley, Neb.
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, former chairman of the Independent Community Banks of America, created the monthly economic survey in 2005.
Colorado: For the 16th straight month, Colorado’s Rural Mainstreet Index remained above 50.0, though it slipped to 51.0 from 55.6 in December. The farmland and ranchland-price index tumbled to 41.0 from December’s much stronger 69.4. Colorado’s hiring index for January fell to 51.4 from December’s 58.7.
Illinois: After moving above growth neutral for 15 straight months, the RMI for Illinois declined to 49.7 for January and was down from December’s 54.1. The Illinois farmland-price index plunged to 31.7 from December’s 47.3. The state’s new-hiring index fell to 44.0 from 48.9 in December.
Iowa: The January RMI for Iowa declined to 50.8 from December’s 55.3. The farmland-price index for January sank to 38.1 from December’s 52.3. Iowa’s new-hiring index for January sank to 49.1 from December’s 53.9.
Kansas: The Kansas RMI for January dipped to 52.2 from December’s 53.6. The farmland-price index for January advanced to 56.2 from December’s 48.2. The state’s new-hiring index soared to 63.6 from December’s 50.2.
Minnesota: The January RMI for Minnesota fell to 48.8 from 53.6 in December. Minnesota’s farmland-price index for January expanded to 50.6 from December’s 40.9. The new-hiring index rose to 66.7 from 44.7 in December.
Missouri: The January RMI for Missouri slumped to 52.7 from 59.0 in December. The farmland-price index for January declined to a strong 66.5 from December’s 75.4. Missouri’s new-hiring index decreased to 71.8 from 78.2 in December.
Nebraska: After moving below growth neutral in January of last year, Nebraska’s Rural Mainstreet Index has been above growth neutral for 12 straight months. The January RMI slipped to 51.2 from 54.4 in December. The farmland-price index for January dipped to 44.4 from 48.0 in December. Nebraska’s new-hiring index increased to 54.1 from 50.1 in December.
North Dakota: The North Dakota RMI for January climbed to 57.1 from 56.3 in December. The farmland-price index declined to 66.3 from 70.2 in November. North Dakota’s new-hiring index rose to 65.0 from December’s 61.0.
South Dakota: The January RMI for South Dakota fell to 51.3 from December’s 55.8. The farmland-price index for January sank to 46.1 from 51.6 in December. South Dakota's new-hiring index for January advanced to 55.5 from December’s 53.3.
Wyoming: The January RMI for Wyoming sank to 49.1, down from December’s 54.5. The January farmland and ranchland-price index sank to 38.9 from December’s 46.4. Wyoming’s new-hiring index for January improved slightly to 49.8 from December’s 49.0.