The Creighton University Rural Mainstreet Index (RMI) fell for the fourth straight month, sinking below growth neutral for a second consecutive 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 region's overall reading for July slumped to 46.0 from 49.8 in June. The index ranges between 0 and 100 with a reading of 50.0 representing growth neutral. This was the fourth consecutive decline in the region's overall reading.
"The Rural Mainstreet economy is now experiencing a downturn in economic activity. Supply chain disruptions from transportation bottlenecks and labor shortages continue to constrain growth. Farmers and bankers are bracing for escalating interest rates — both long-term and short-term," said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University's Heider College of Business.
Bankers were asked this month to identify the greatest risk for farmers over the next 12 months. Regarding the top risks, 53.9% named rising input prices, 34.6% indicated falling grain/livestock prices, and 11.5% reported drought was the top threat.
Among bankers naming drought as the greatest risk, Jim Eckert, CEO of Anchor State Bank in Anchor, Ill., said "recent rains have improved crop prospects, but our area in Central Illinois is still dry compared to northern and southern Illinois."
Regarding risks to farmers, James Brown, CEO of Hardin County Savings Bank in Eldora, Iowa, reported that "it's the combination of higher input costs and a potential fall in commodity prices that are the biggest risks to farmers. Not just one or the other."
Farming and ranching: The region's farmland price index for July declined to 66.0 from June's 76.8, marking the 22nd straight month that the index has moved above growth neutral. July's solid reading was the lowest index since February 2021.
Bankers were asked this month to project the change in farmland prices for the next 12 months. On average, bank CEOs expect farmland prices to advance by 2.1% over the next 12 months.
Over the last 30 days, Peoples Company Appraisal Team tracked 125 cropland auctions across 51 Iowa counties. In total, 11,812 acres of cropland sold in auctions for $151.0 million, or an average of $12,780 per acre.
Farm equipment sales: The July farm equipment-sales index sank to 56.5 from 71.4 in June. This was the 20th straight month that the index has advanced above growth neutral, but it marked the lowest reading for the index since January 2021.
Banking: The July loan volume index declined to a still strong 72.0 from 78.5 in June. The checking-deposit index sank to 47.9 from June's 57.4, while the index for certificates of deposit and other savings instruments slumped to 33.3 from 35.2 in June. "Escalating costs of farm inputs supported strong borrowing from farmers," said Goss.
Even with significant 2022 input price increases, bankers expect to record a half percentage point decline in farm loan delinquencies over the next 12 months.
Hiring: The new hiring index improved to 60.9 from 57.4 in June. Labor shortages continue to be a significant issue constraining growth for Rural Mainstreet businesses. Despite labor shortages, the Rural Mainstreet expanded non-farm employment by 2.8% over the past 12 months. This compares to a faster 3.3% for urban areas of the same 10 states for the same period of time.
Confidence: The slowing economy, strong energy prices and agriculture input prices constrained the business confidence index to 26.0, its lowest level since May 2020, and down from 33.9 in June. This marks the lowest back-to-back readings since the beginning of the pandemic in April and May of 2020.
Home and retail sales: The home-sales index dropped to a weak 48.0, down from June's solid 55.4. The retail-sales index for July sank to 46.0 from June's 48.2. "Rising energy prices and higher interest rates reduced home and retail sales on Rural Mainstreet. This is the lowest home sales index since January 2019, and first back-to-back below growth-neutral readings for the retail index since January/February 2021," said Goss.
The survey represents an early snapshot of the economy of rural agriculturally and energy-dependent portions of the nation. The Rural Mainstreet Index is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. It provides the most current real-time analysis of the rural economy. Goss and Bill McQuillan, former chairman of the Independent Community Banks of America, created the monthly economic survey and launched it in January 2006.
The July RMI for Missouri decreased to a regional-high 69.4 from 78.0 in June. The farmland-price index declined to 77.5 from 90.2 in June. The state's hiring gauge decreased to 63.4 from 74.1 in June. Over the past 12 months, USBLS data show that Missouri's Rural Mainstreet Economy experienced an 6.7% gain in non-farm employment, while urban areas in the state gained 1.8% in non-farm employment.
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