For the 13th month, Creighton University’s Rural Main Street Index remained above neutral growth, according to its December survey of bank CEOs in rural areas.
The survey, www.creighton.edu/economicoutlook, represents a first look at the economy of 10 rural states dependent on agriculture and energy: Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming. The RMI provides the latest real-time analysis of the rural economy. The survey was released on December 15.
The overall December reading slipped to 66.7 from November’s 67.7. The index ranges between 0 and 100 with a reading of 50.0 representing neutral growth.
“Strong grain prices, historically low Federal Reserve interest rates and export growth have supported the rural main street economy. USDA data shows that agricultural exports year-to-date 2021 are more than 20.7% higher than the same period in 2020. This has been an important factor in supporting the economy of the rural main street,” said Ernie Goss, Ph.D., Jack A. MacAllister, chair of regional economics at Heider College of Business at Creighton University, Omaha, Nebraska.
Todd Douglas, CEO of First National Bank in Pierre, South Dakota, said, “With Paycheck Protection Program funds and good commodity prices, even with some areas of reduced returns due from the lack of moisture, agricultural borrowers are expected to be in good shape for 2022.”
“Seven out of 10 bankers described their local economy as expanding, while only 6.7% indicated their local economy was experiencing a slight economic downturn,” Goss said.
The regional farmland price index improved to a very strong and record high of 90.0 from 85.5 in October, also a record high. The December reading represented the 15th month the index has moved above neutral growth.
According to bank CEOs, annual cash rents for rainfed and non-pastoral agricultural land have climbed to $262 from $218 in February 2020.
But some bankers had warnings.
Jeff Bonnett, CEO of Havana State Bank in Havana, Illinois, said, “Inflation is real and affecting people in our service areas.
Confirming the inflation outlook, Steve Simon, CEO of South Story Bank & Trust in Huxley, Iowa, said: “Yields and prices have ended up beating expectations for 2021, but it looks like land costs and all the agricultural inputs will increase significantly in 2022.”
The December farm equipment sales index rose to 74.1 from November’s 62.1. This is the 13th month the index has exceeded neutral growth and the strongest index since April 2011.
The December loan volume index rose to 61.7 from 53.2 in November. The check deposit index fell to 68.3 from 71.0 in November, while the certificates of deposit and other savings instruments index fell to 26.7 from 32.3 in November.
Jim Brown, CEO of Hardin County Savings Bank in Eldora, Iowa, said, “(See) very strong working capital and net worth gains, even from marginal customers.”
Only 3.3% of bankers said farmers in their area were in financial difficulty with an increased need for borrowing.
The new hiring index stood at a very healthy 72.4 from 67.7 in November. Labor shortages continue, limiting business growth.
Despite strong recent job gains, data from the U.S. Bureau of Labor Statistics indicates that, compared to its pre-COVID-19 level, Rural Mainstreet has lost 2.5% of its non-farm jobs ( not seasonally adjusted).
After falling for five consecutive months, the confidence index, which reflects bank CEOs’ expectations for the economy six months from now, rose to 55.2 from 48.4 in November. The home sales index rose to 72.4 from 65.0 in November. The retail sales index for December fell to 68.3 from 58.1 in November.
“Healthy farm prices and federal stimulus spending are having a very positive effect on retail sales and rural main street home sales,” Goss said.