Rural Bankers Temper Concerns About Farmland Values

Posted on 02/19/2018 11:14 AM

Rural bankers have grown less negative on farmland values, but remain bearish overall, according to the latest reading on banker attitudes conducted by Dr. Ernie Goss, Creighton University. In his monthly Rural Mainstreet Index survey of rural bankers in 10 Midwestern states from Colorado to Illinois, Goss found the monthly farmland index rose to 46.3 from 42.2 for January. This is the highest reading since July 2014, but it is the 51st straight month the index has fallen below growth neutral 50.0.

The February farm equipment-sales index jumped to 33.8 from January's very weak 24.4. This marks the 54th consecutive month the reading has remained below growth neutral, 50.0.

The monthly survey found banker attitudes toward their general economy shifted into the positive. The overall index soared to 54.8 from 46.8 in January, the highest reading for the overall index since May 2014. The index ranges between 0 and 100 with 50.0 representing growth neutral.

"Given that fewer than one in four, or 23.9%, of bankers reported economic growth in their area, the solid February reading surprised me. However, weak agriculture commodity prices continue to weigh on the rural economy," says Goss.

Bank CEOs were asked how their banks were dealing with weak farm income. More than four in 10, or 45.2%, reported increasing collateral requirements, 21.4% indicated rejecting a higher percent of loan applications, and 11.9% reported reducing the average size of farm loans.

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