The overall Rural Mainstreet Index (RMI) held above the 50.0 growth neutral reading in July, marking the second time since July 2023 the index is above growth neutral for two straight months, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.
Overall: The region’s overall reading for July slipped to 50.6 from June’s 51.9. The index ranges between 0 and 100, with a reading of 50.0 representing growth neutral.
“This is the first time since July and August of 2023 that the survey has registered two consecutive months of above growth neutral readings,” says Dr. Ernie Goss, at Creighton University who conducts the survey.
According to Jeff Bonnett, President of Havana National Bank in Havana, Ill., “Until ag commodity prices move to above breakeven, especially for corn and soybeans, I will continue in my bearish outlook for our 100% Ag dependent local economy here in West Central Illinois.”
This month, bankers were asked to rank the greatest threats to farm income for the next year. More than three of four, or 76.1%, named low farm commodity prices as the top threat, while 19.9%, or almost one of five, identified tariffs as the top risk for the farm economy over the next 12 months. The remaining 4.0% assessed rising input costs as the greatest hazard over the next 12 months.
Farming and ranch land prices: For the 14th time in the past 15 months, farmland prices slumped below growth neutral. The region’s farmland price increased slightly to a weak 47.9 from 40.9 in June. “Elevated interest rates, higher input costs and volatility from tariffs have put downward pressure on farmland prices. On average, bankers expect farmland prices to fall by 2.9% over the next 12 months,” observes Goss.
Bank CEOs were asked about the expected impact from President Trump’s tariff actions. Approximately four of 10 expect higher tariffs to result in retaliation among trading partners, thus lowering farm income. The remaining six of 10 indicate it was too early to assess potential impacts of the President’s tariff negotiations.
Farm equipment sales: The farm equipment sales index slumped to a very weak 16.7 from 22.7 in June. “This is the 23rd straight month the index has fallen below growth neutral. High input costs, tighter credit conditions, low farm commodity prices and market volatility from tariffs are having a negative impact on the purchases of farm equipment,” notes Goss.
Confidence: Rural bankers remain pessimistic about economic growth for their area over the next six months. The July confidence index declined to 36.0 from June’s frail 37.0. “Weak grain prices and negative farm cash flows, combined with tariff retaliation concerns, pushed banker confidence lower,” states Goss.
The RMI is a unique index covering 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, Creighton University states.