A key index reflecting farm banker attitudes about farmland values rose to its highest level since 2013. The index is part of the Rural Mainstreet Index (RMI), which is conducted monthly by Creighton University’s Ernie Goss.
For December, the farmland and ranchland-price index soared to 52.8 from November’s weak 40.4. This is the first time since November 2013 that the index has risen above growth neutral, 50.0. The November farm equipment-sales index sank to 27.9 from November’s 37.5. This marks the 75th month that the reading has remained below growth neutral 50.0.
For December, the RMI remained above growth neutral for the fourth straight month and for the 10th time in the past 12 months, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy. While the overall index for December fell to 50.2 from 54.2 in November, it marked the tenth time in 2019 that the index has remained above growth neutral 50.0. “Federal agriculture crop support payments and somewhat higher grain prices have boosted the Rural Mainstreet Index above growth neutral for the month,” says Goss.
“Bank CEOs, on average, expect approximately 12.4% of grain farmers to experience financial losses for 2020. However, this is down from last year at this time when bankers projected 15.3% of grain farmers to experience negative cash flows for 2019,” Goss adds.
This month, bankers were asked to project the level of farm loan defaults for 2020. “One of nine bank CEOs expect 2020 farm loan defaults to expand by 10% to 20%. On average bankers expect 2020 farm loan defaults to grow by approximately 4.0%. This is down from an anticipated gain of 4.4% for 2019 recorded last December,” notes Goss.
Bankers were also asked about their bank’s response to weak farm income. Almost two-thirds, or 65.7%, indicated their bank had increased collateral requirements, while 34.3% reported that their bank had rejected a higher percentage of farm loan applications.