Continuing low commodity prices has nearly 10% of rural bankers seeing farm foreclosures as their bank's greatest threat over the next five years, according to this month's Creighton University Rural Mainstreet Index (RMI). The survey of rural bank CEOs across 10 midwestern states dependent on agriculture and/or energy found the RMI remains below growth neutral. In addition, the RMI's farmland and ranchland-price index for October slipped to 39.3 from 39.6 in September, the 47th straight month the index has fallen below growth neutral 50.0. "As a result of weak farm income and low agriculture commodity prices, approximately 9.5% of bank CEOs expect farm loan foreclosures to pose the greatest threat to banking operations over the next five years," says Dr. Ernie Goss, who conducts the monthly survey.
Bankers were asked to compare current spot prices for a bushel of corn to break even. Only 2.4% of bankers indicated that prices between $3.50 and $3.75 were above break even. Approximately 45.2%reported current spot prices were below break even.
According to Jeffrey Gerhart, president and chairman of the Bank of Newman Grove in Newman Grove, Nebraska, "Break-even prices vary from farmer to farmer. (It) depends upon the debt carried by the farmer. It's all about their cash flow."
However, Fritz Kuhlmeier, CEO of Citizens State Bank in Lena, Illinois, said, "Where can I find a spot price for corn of $3.50 or above today? Try $3.00 to $3.20, which is below the break even by all means."
The October farm equipment-sales index increased to 29.3 from September's 27.4. This marks the 50th consecutive month the reading has dropped below growth neutral 50.0.