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Report: Rural Mainstreet Index remains very weak

While the Creighton University Rural Mainstreet Index rose for March, it remains weak, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

Overall: The Rural Mainstreet Index (RMI), which ranges between 0 and 100, increased to 40.2 from February’s 37.0 and January’s 34.8.

“This is the seventh straight month the overall index has moved below growth neutral. Recent declines are the result of lower agriculture and energy commodity prices and downturns in manufacturing. Since June of last year, prices for farm products have fallen by approximately 11 percent, and fuel by roughly 25 percent," said Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University's Heider College of Business. 

Farming and ranching: The farmland and ranchland price index for March tumbled to 20.2 from February’s 29.8. This is the 28th straight month the index has moved below growth neutral.

As in previous months, there is a great deal of variation across the region in the direction and magnitude of farmland prices, with prices growing in some portions of the region. On average, bankers reported an average decline of 6.7 percent over the past year.  Only 4.4 percent of bankers reported an increase in farmland prices over the past 12 months, and approximately 4.6 percent detailed farmland price declines of more than 20 percent over the same period of time.

Jeffrey Bonnett, president of the Havana National Bank in Havana, Illinois, reported sales of 775 acres of tillable land for $13,000 per acre.  According to Bonnett, “This is above average ground in the area we serve, but with the low interest rate environment, land values seem to be holding steady.”

The March farm equipment-sales index sank to a record low of 6.7 from February’s 11.3.  “Weakness in farm income continues to constraint the sale of agriculture equipment across the region. Reductions in farm prices have negatively affected the agriculture equipment dealers and manufacturers in the region,” said Goss.

Banking: The March loan-volume index soared to 72.1 from last month’s 48.9. The checking-deposit index rose to 53.4 from February’s 44.6, while the index for certificates of deposit and other savings instruments dipped to 38.6 from 39.8 in February.

This month, bankers were asked to estimate the change in farm loan defaults for their lending areas over the past year. On average, bankers reported an increase of approximately 2 percent in loan defaults over the past 12 months.  Bank CEOs expect farm loan defaults to expand by only 5 percent over the next 12 months.

Several bankers did report restructuring of debt due to low agriculture commodity prices.  But as indicated by Bonnett of Havana National Bank, “Obviously this practice is a Band-Aid until commodity prices get back in line. Farmers will not be able to sustain in such a low price environment for too many more harvests.”

Hiring: Contrary to other economic indicators, Rural Mainstreet businesses increased hiring for the month with a March hiring gauge of 60.3, up from 48.9 in February. “Even with the March upturn, the Rural Mainstreet employment is down almost 1 percent from this time last year. This contrasts to an employment gain of 1.5 percent for urban areas of the region,” said Goss.

In parts of the region, labor shortages were reported. For example, Dirk Meminger, CEO of Sauk Valley Bank in Sterling, Illinois, reported, “Our area businesses continue with many unfilled positions, across industries, professional as well as various levels of skill sets.”

Confidence: The confidence index, which reflects expectations for the economy six months out, moved slightly lower to 30.1 from 30.4 in February, indicating a very pessimistic outlook among bankers. “As in previous months, bankers see few factors pointing to improvements for the Rural Mainstreet economy,” said Goss.

Home and retail sales: Home sales remain the bright spot of the Rural Mainstreet economy with a March index of 55.8, which was an increase from 51.1 in February. The March retail-sales index fell to a very weak 30.1 from 37.0 last month. “Home sales held up for the month, but rural retailers have yet to experience retail sales gains resulting from declines in fuel costs,” said Goss.

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. The survey is supported by a grant from Security State Bank in Ansley, Neb.

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.

Colorado: Colorado’s Rural Mainstreet Index (RMI) advanced to 51.9 from 43.9 in February. The farmland and ranchland price index expanded to 58.8 from February’s 56.1. Colorado’s hiring index for March rose to 63.8 from February’s 54.3.

Illinois: The March RMI for Illinois increased to 37.8 from 32.5 in February. The farmland-price index sank to 16.0 from February’s 21.2. The state’s new-hiring index climbed to 48.2 from last month’s 45.5.

Iowa: The March RMI for Iowa advanced to 50.2 from February’s 40.4. Iowa’s farmland-price index for March fell to 39.1 from 45.9 in February. Iowa’s new-hiring index for March rose to 56.6 from 54.5 in February.

Kansas: The Kansas RMI for March sank slightly to 37.0 from February’s 37.5. The state’s farmland-price index for March slumped to 12.3 from February’s 28.1. The new-hiring index for Kansas declined to 44.9 from 48.0 in February.

Minnesota: The March RMI for Minnesota jumped to 44.7 from February’s 39.2. Minnesota’s farmland-price index sank to 28.8 from 30.1 in February. The new-hiring index for the state advanced to 52.8 from last month’s 48.7.

Missouri: The March RMI for Missouri slumped to 25.1 from 39.2 in February. The farmland-price index tumbled to 15.8 from February’s 37.9. Missouri’s new-hiring index declined to 32.1 from February’s 51.5.

Nebraska: The Nebraska RMI for March expanded to 48.9 from 37.0 in February. The state’s farmland-price index grew to 38.0 from February’s 29.8. Nebraska’s new-hiring index climbed to 56.2 from 48.6 in February.

North Dakota: The North Dakota RMI for March increased to a regional low of 14.7 from February’s 14.3, also a regional low. The farmland-price index fell to 10.7 from 15.6 in February.  North Dakota’s new-hiring index expanded to 33.2 from February’s 11.8.

South Dakota: The March RMI for South Dakota sank to 39.2 from 40.3 in February.  The farmland-price index tumbled to 15.8 from 48.9 in February. South Dakota's new-hiring index fell to 50.0 from February’s 55.6.

Wyoming: The March RMI for Wyoming grew to 34.5 from February’s 32.1. The March farmland and ranchland-price index slumped to 10.7 from 14.6 in February.  Wyoming’s new-hiring index fell to 41.5 from February’s 43.1.

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