Rural Banker Confidence at Record Low

For a third straight month, the overall Rural Mainstreet Index (RMI) sank below growth neutral, according to the November survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

Overall: The region’s overall reading for November fell to 40.4 from 44.4 in October and 49.5 in September. The index ranges between 0 and 100, with a reading of 50.0 representing growth neutral. 

“This is the weakest recorded reading in more than three years, or since June 2000, shortly after the beginning of the pandemic, and points to weaker farm and non-farm economies,” states Dr. Ernie Goss, Creighton University, who conducts the survey.

Farming and ranching land prices: The region’s farmland price index climbed to 66.7 from October’s 55.6. “Creighton’s survey continues to point to solid, but slowing, growth in farmland prices as farm commodity prices weakened,” says Goss.

Farm equipment sales: The farm equipment-sales index for November increased slightly to a weak 49.5 from October’s 48.0. “This is the fifth time in the past 6 months that the index has fallen below growth neutral. Higher borrowing costs are having a negative impact on the purchases of farm equipment,” notes Goss.

“For a third consecutive month, several bankers voiced concerns over economic losses of pork producers in their area,” states Goss. Matthew Brown, Vice-President with CBI Bank and Trust in Washington, Iowa states, “We are losing a hog integrator that produced 400,000 head of hogs annually. They were shut down by Farm Credit with $38.8 million in debt. Currently preparing for liquidation.” 

Banking: The November loan volume index fell to a solid 57.9 from October’s 77.7, and from a reading of 65.8 in November 2022. The checking deposit index soared to 56.0 from October’s very weak 26.9.  This is the first time since January 2023 that the index has advanced above growth neutral. The index for certificates of deposits and other savings instruments declined to a still solid 58.0 from 59.6 in October.

“Higher short-term interest rates produced by Federal Reserve rate hikes over the past year continue to pose a significant threat to community banks by expanding the costs of customer deposits while the rates on bank loans have not risen as significantly over the same time period,” observes Goss.

Confidence: Higher interest rates, deposit outflows and a slowing farm economy over the past several months continue to constrain the business confidence index to a record low 21.2 from 24.1 in October. “This month’s reading is the most negative outlook recorded since Creighton began the monthly survey in January 2006,” states Goss. “Approximately 57.7% of bankers expect economic conditions to worsen in the next six months,” adds Goss.

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. The index provides the most current real-time analysis of the rural economy, it notes.