Rural Midwest Economy Improves; But Agriculture Lags

Posted on 08/16/2018 11:07 AM

A key monitor continues to show rising economic activity in the rural Midwest. The Creighton University Rural Mainstreet Index (RMI) climbed above growth neutral in August for a seventh straight month, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

Overall: The overall index climbed to 54.8 from 53.8 in July. The index ranges between 0 and 100 with 50.0 representing growth neutral.

"Surveys over the past several months indicate the Rural Mainstreet economy is expanding outside of agriculture. However, the negative impacts of recent trade skirmishes have begun to surface, weakening already anemic grain prices," says Creighton's Ernie Goss, who conducts the monthly survey.

According to Jim Stanosheck, CEO of State Bank in Odell, Neb.,"The tariffs have and are costing our ag customers on grain prices and items they must purchase. Talking to one of my customers this morning, he thought that maybe the tariffs would bring about better prices in the future."

Farming and ranching: The farmland and ranchland-price index for August was unchanged from July's 44.7. This is the 57th straight month the index has fallen below growth neutral 50.0.

In reaction to weak farm commodity prices and income, almost one-third, or 31.0%, of bank CEOs reported rejecting a higher percentage of farm loans. More than half, or 54.8%, indicated raising collateral requirements, while 4.8% reported reducing the size of farm loans.

The August farm equipment-sales index fell to 37.8 from July's 38.8. This marks the 60th consecutive month the reading has moved below growth neutral 50.0.

In terms of the sale of farm equipment over the next 12 months, bankers expect sales to decline by 7.8%.

Banking: Borrowing by farmers expanded for August, but at a slower pace than in July, as the loan-volume index declined to 72.2 from 76.9 in July. The checking-deposit index slumped to 36.0 from July's 37.8, while the index for certificates of deposit and other savings instruments increased to 48.8 from 43.9 in July.

Each month, community bank presidents and CEOs in nonurban agriculturally and energy-dependent portions of a 10-state area are surveyed regarding current economic conditions in their communities and their projected economic outlooks six months down the road. Bankers from Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming are included.

This survey represents an early snapshot of the economy of rural agriculturally and energy-dependent portions of the nation. The Rural Mainstreet Index (RMI) is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300.

Add new comment