Rural bankers from 10 states across the heartland project a 3% decline ahead in farmland values for the year ahead, according to Creighton University's Dr. Ernie Goss. Each month, Goss surveys bank CEO's on economic conditions in their area and compiles their attitudes in the Creighton University Rural Mainstreet Index (RMI).
This month, and in August 2016, the survey asked bank CEOs to project the change in farmland prices for the next year. On average, bankers this month projected a 3.1% decline in agriculture over the next 12 months. This is a significant improvement from August when bankers expected a decline of 7% for the next 12 months, Goss reports.
The farmland and ranchland-price index portion of the RMI for June rose to 40.0, its highest level since September of last year, and up from May's 36.4. This is the 43rd straight month the index has languished below growth neutral 50.0, notes Goss.
The RMI, which ranges between 0 and 100, dipped to 50.0 from 50.1 in May. Prior to May, the last time the overall index was at or above growth neutral was August 2015.
"Stabilizing and slightly improving farm commodity prices helped push the overall index at or above growth neutral for the last two months," says Goss. "Though grain prices remain below breakeven for most farmers, recent improvements in cattle and hog prices have boosted the overall index for Rural Mainstreet Economy to growth neutral."
However, Goss reports that due to weak farm income, almost one fourth of bankers reported rejecting a higher percentage of farmer loan applications and approximately 60.9% reported boosting collateral on farm loans.