A monthly survey of rural bankers finds a slight uptick in economic prospects for their region.
According to the August survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy, the overall Rural Mainstreet Index (RMI) climbed slightly above growth neutral for only the second time in the past six months.
Readings range between 0 and 100 with 50.0 representing growth neutral.
Overall: The region’s overall reading for August rose to 50.3 from 42.1 in July.
“Despite higher input costs and improved, but still relatively weak grain prices, bank CEOs rated approximately 52.5% of farm borrowers in good condition with the remaining 47.5% rated in fair condition,” says Creighton University’s Ernie Goss, who conducts the survey.
Approximately 47.5% of bankers expect farm income to decline in the next 12 months. Roughly 36.8% anticipate little or no change in farm income, while the remaining 15.7% expect a slight increase in farm income over the 12-month period.
Farming and ranchland prices: For the first time since April, the farm and ranchland price index fell below growth neutral. The farm and ranchland index dropped to 47.2 from 52.8 in July.
“Though farm and ranchland values have been holding up much better than farm and ranching income, weak grain prices, lower farm liquidity and somewhat tougher credit standards have restrained growth in farmland values,” comments Goss.
Farm equipment sales: The August farm equipment sales index sank to a very weak 22.2 from July’s 27.8. This is the 36th straight montht the index has fallen below growth neutral.
According to Todd Douglas, CEO of First National Bank in Pierre, South Dakota, “We have a good percentage of cattle ranchers which is helping to support our ag lending operation. However, the increasing drought in western South Dakota, Wyoming and Montana has made some or our borrowers start to liquidate their herds.”
Confidence: Rural bankers remain pessimistic about economic growth for their area over the next six months. The August economic confidence index slumped to 31.6 from July’s 34.2.
The survey represents an early snapshot of the economy of rural agricultural- and energy-dependent portions of the nation.
The Rural Mainstreet Index is a unique index that covers 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. The index provides the most current real-time analysis of the rural economy.