Rural Mainstreet Index Begins 2020 on Strong Footing: Bank Loans to Farms Lowest in Almost 7 Years
The Creighton University Rural Mainstreet Index (RMI) for January climbed to its highest level since June 2018. January’s reading marked the fifth straight month the reading has moved above growth neutral according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.
Overall: While the overall index for January rose to 55.9 from 50.2 in December. It was the 11th time in the past 12 months that the index has risen above growth neutral 50.0.
“Only 17.7% of bank CEOs reported that their local economy was in an economic downturn. This is an improvement from one year ago when 22.9% indicated that their local economy was in a recession, or economic downturn,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.
Don Reynolds, chairman of Regional Missouri Bank in Marceline, Missouri, said, “Farm income for 2019 and projections for 2020 are not as bleak as expected.”
Farming and ranching: After moving above growth neutral last month, the farmland and ranchland-price index fell to 45.6 from December’s much stronger reading of 52.8. This is the 73rd time in the past 74 months that the index has fallen below growth neutral.
While farm land prices have weakened for several years, property taxes on that land have tended to rise. “Two of three Nebraska bankers reported property taxes as a significant factor reducing farm profitability, while only one of ten non-Nebraska bankers indicated that property taxes were a significant factor reducing farm profitability,” reported Goss.
The January farm equipment-sales index increased to a weak 35.0 from December’s 27.9. This marks the 76th month that the reading has remained below growth neutral 50.0.
This month, bankers were asked to project farm equipment sales for 2020. On average, bank CEOs expect sales to decline by 4.2% this year.
Banking: Borrowing by farmers weakened again in January. The borrowing index declined to 48.5, its lowest level since February 2013, from December’s 50.0. The checking-deposit index rose to 76.5 from December’s 61.1, while the index for certificates of deposit and other savings instruments climbed to 60.3 from 50.0 in December.
Hiring: The employment gauge advanced to a very healthy 61.8 from December’s 60.0. Despite the trade war and weaker manufacturing in rural areas, Rural Mainstreet businesses are now hiring at a solid pace.
Over the past 12 months, the Rural Mainstreet economy added jobs at a 0.4% pace, or well below the rate of urban area growth of 1.0% for the same period.
Confidence: The confidence index, which reflects bank CEO expectations for the economy six months out, increased to a still weak 50.0 from 45.8 in December. The index continues to indicate a negative economic outlook among bankers. “Creighton’s January survey was conducted before the signing of the Phase 1 trade agreement with China and the Senate passage of USMCA. I expect the passage of USMCA and the January 15 trade agreement with China to boost business confidence in the months ahead,” said Goss.
Larry Winum, CEO of Glenwood State Bank in Glenwood, Iowa, said, “Good to see Sen. Grassley as Chairman of the Finance committee get the USMCA trade agreement passed out of committee. Now that Congress is back in session the full Senate should make this their first piece of business and get it passed. The farm industry has been patient and needs the markets opened to full trade.”
Home and retail sales: The home-sales index climbed to a healthy 59.1 from December’s 58.6. The retail sales index for January sank to 45.6 from 51.4 in December.
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. It gives 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 in 2005.
Below are the state reports:
Colorado: Colorado’s Rural Mainstreet Index (RMI) for January climbed to 56.2 from December’s 53.0. The farmland and ranchland-price index sank to 45.3 from December’s 52.9 Colorado’s hiring index for January expanded to 62.2 from 59.7 in December. Over the past 12 months rural areas in Colorado have experienced job losses of minus 0.8% compared to a stronger 2.5% for urban areas of the state.
Illinois: The January RMI for Illinois improved to 58.1 from 53.8 in December. The farmland-price index slumped to 45.9 from December’s 53.1. The state’s new-hiring index advanced to 72.2 from last month’s 61.2. Over the past 12 months rural areas in Illinois have experienced job gains of 2.0% compared to a weaker 0.5% for urban areas of the state.
Iowa: The January RMI for Iowa increased to 56.1 from December’s 53.5. Iowa’s farmland-price index slumped to 45.3 from December’s 52.5. Iowa’s new-hiring index for January advanced to 57.2 from December’s 48.7. Over the past 12 months rural areas in Iowa have experienced job losses with employment growth at minus 0.6% compared to a stronger 1.1% for urban areas of the state.
Kansas: The Kansas RMI for January rose to 57.0 from December’s 52.6. The state’s farmland-price index sank to 45.6 from 52.9 in December. The new-hiring index for Kansas advanced to 64.2 from 61.1 in December. Over the past 12 months rural areas in Kansas have experienced job additions of 0.8% compared to a stronger 1.4% for urban areas of the state.
Minnesota: The January RMI for Minnesota improved to 57.6 from December’s 53.4. Minnesota’s farmland-price index fell to 45.8 from December’s 53.0. The new-hiring index for January climbed to 68.5 from December’s 60.3. Over the past 12 months rural areas in Minnesota have experienced job growth of 1.6% compared to job losses of minus 0.1% for urban areas of the state.
Missouri: The January RMI for Missouri increased to 48.4 from December’s 48.1. The farmland-price index fell to 45.2 from December’s 52.0. Missouri’s new-hiring index for January was up at 55.9 from December’s 50.0. Over the past 12 months rural areas in Missouri have experienced job additions of 1.6% compared to a gain of 1.2% for urban areas of the state.
Nebraska: The Nebraska RMI for January increased to 49.1 from December’s 44.3. The state’s farmland-price index fell to 44.8 from last month’s 52.1. Nebraska’s new-hiring index slumped to 45.8 from December’s 53.4. Over the past 12 months rural areas in Nebraska lost jobs at a rate of minus 1.1% compared to a gain of 2.6% for urban areas of the state.
North Dakota: The North Dakota RMI for January advanced to 56.0 from December’s 51.7. The state’s farmland-price index increased to 45.2 from 40.1 in December. The state’s new-hiring index climbed to 56.7 from December’s 47.9. Over the past 12 months rural areas in North Dakota have experienced a flat employment level compared to 1.2% for urban areas of the state.
South Dakota: The January RMI for South Dakota remained above growth neutral for the month, increasing to 57.4 from December’s 53.3. The state’s farmland-price index fell to 45.7 from December’s 53.0. South Dakota’s new-hiring index rose to a very strong 67.2 from December’s 63.5. Over the past 12 months rural areas in South Dakota have experienced job growth of 0.9% compared to 1.9% for urban areas of the state.
Wyoming: The January RMI for Wyoming jumped to 55.7 from December’s 50.2. The January farmland and ranchland-price index sank to 45.1 from 52.4 in December. Wyoming’s new-hiring index increased slightly to 54.6 from December’s 54.0. Over the past 12 months rural areas in Wyoming have lost jobs at a rate of minus 0.9% as urban areas gained employment at the rate of 0.7%.
Tables 1 and 2 summarize the survey findings. Next month’s survey results will be released on the third Thursday of the month, Feb. 20.
Source: Creighton University