A monthly survey of rural bankers continues to reflect the weak level of economic activity in the nation’s heartland. The Creighton University Rural Mainstreet Index (RMI) July’s reading represented the fourth straight month with a reading indicating recessionary economic conditions. The monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy is conducted by Dr. Ernie Goss.
The overall index for July climbed to 44.1, well below growth neutral, but up from June’s 37.9 and April’s record low 12.1. The index ranges between 0 and 100 with a reading of 50.0 representing growth neutral.
“Farm commodity prices are down by 12.5% over the last 12 months. As a result, and despite the initiation of $16 billion in USDA farm support payments, only 6% of bankers reported their area economy had improved compared to June while 17.6% said economic conditions had worsened,” says Goss.
Farmland prices continue to slide, he reports, with a July reading of 45.6, down from June’s 46.8. This is the 79th time in the past 80 months the index has been below growth neutral. Falling agriculture commodity prices and farm income have failed to diminish annual farm rents per acre, he notes.
Bank CEOs reported average per acre farmland rents of $220, which is almost unchanged from that detailed earlier this year, and four years ago. The July farm equipment-sales index increased to a weak 34.4 from 32.8 in June. This marks the 82nd straight month the reading has remained below growth neutral 50.0.
This month, bankers estimated that farm loan defaults would rise by 5% over the next 12- month period. This is up slightly from 4.8% registered one year ago. Approximately 38% of bankers reported a decline in customer visits due to the coronavirus. Almost one-third of bank CEOs indicated the coronavirus had reduced the number of farm loan applications.