Trouble continues in the rural economy. For the fourth straight month, the Rural Mainstreet Index (RMI) has declined. This is the second consecutive month of the RMI being below growth neutral.
For July 2022, the RMI sits at 46. That is down from June’s 49.8. The index ranges between 0 and 100 with a reading of 50 representing growth neutral and is generated by a monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.
“The Rural Mainstreet economy is now experiencing a downturn in economic activity,” says Ernie Goss, who chairs Creighton’s Heider College of Business and leads the RMI. “It is concerning as this is the first time since 2020, we’ve had back-to-back months of readings below growth neutral. 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.”
Bankers were asked this month to identify the greatest risk for farmers over the next 12 months. They include:
- Rising input prices: 54% of respondents
- Falling grain/livestock prices: 35% of respondents
- Drought: 16% of respondents
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 “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.”
Farmland Values Stay Strong
The region’s farmland price index for July declined to 66 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% 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 approximately $151 million, or an average of $12,780 per acre.
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.
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.
The slowing economy, strong energy prices and agriculture input prices constrained the business confidence index to 26, 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.
No comments:
Post a Comment