Rural Mainstreet moves higher with surging farmland prices

Bank CEOs project decline in corn and soybean prices over the next 6 months

The Creighton University Rural Mainstreet Index climbed in February and remained above growth neutral for the 15th straight month, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

The region’s overall reading for February rose to 61.5 from January’s 61.1. The index ranges between 0 and 100 with a reading of 50.0 representing growth neutral.

“Strong grain prices, the Federal Reserve’s record-low short-term interest rates, and growing agricultural exports have underpinned the Rural Mainstreet Economy,” said Ernie Goss, Ph.D., Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business, Omaha, Nebraska. The region’s farmland price index decreased to a very strong 78.8 from January’s 88.5 and December’s record high of 90.0. February’s reading represented the 17th straight month the index has moved above growth neutral.

This month, bankers were asked to project corn and soybean prices out six months. On average, bank CEOs expect corn prices per bushel to fall by 2.6% and soybean prices per bushel to drop by 2.3% over the next six months.

The February farm equipment-sales index slipped to a very healthy 72.0 from 72.4 in January. This is the 15th straight month the index has advanced above growth neutral. Readings over the past several months are the strongest string of monthly readings recorded since spring 2011.

Banking

The February loan volume index increased to 40.4 from January’s even weaker 28.8. While February farm loans are normally low, this reading was below expected February readings. The checking-deposit index climbed to 80.8 from January’s 76.9, while the index for certificates of deposit and other savings instruments sank to 34.6 from 42.3 in January.

On average, bank CEOs expect the Federal Reserve to raise short-term interest rates in 2022 by one percentage point which is up from 0.70% (70 basis points) recorded last month. Approximately one in five bankers, or 19.2%, project more than four rate hikes of one-quarter percentage point in 2022.

Jeff Bonnett, president at Havana National Bank in Havana, Illinois, said, “Hopefully the Fed will do three or four (based on what is warranted) 25 basis point hikes starting in March and not 50 in March.”

Bonnett said the Fed should start slow and evaluate the impacts as they are implemented and not be saddled with a fixed plan.

Hiring

The new hiring index expanded to 61.5 from 61.1 in January. Labor shortages continue to be a significant issue constraining growth for Rural Mainstreet businesses.

As a result of recent strong Rural Mainstreet job gains, U.S. Bureau of Labor Statistics data indicate that over the last 12 months, the region has experienced a healthy 4.2% gain in nonfarm employment (non-seasonally adjusted).

Confidence

After moving higher for two straight months, the confidence index, which reflects bank CEO expectations for the economy six months out, sank to a weak 51.9 from January’s healthy reading of 61.1.

Home and retail sales

The home-sales index sank to a still strong 63.5 from January’s 65.4. The retail-sales index for February advanced to a solid 57.7 from January’s reading of 57.4. “Healthy farm commodity prices and federal stimulus spending are having positive impacts on Rural Mainstreet retail sales and home sales,” Goss said.

The survey represents an early snapshot of the economy of rural agriculturally and energy-dependent portions of the nation. The Rural Mainstreet Index is an index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300 people. 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 and launched in January 2006.

State reports

Colorado’s Rural Mainstreet Index for February advanced to 55.7 from January’s 54.1. The farmland and ranchland-price index sank to 77.8 from 88.9 in January. Colorado’s hiring index for February expanded to 60.2 from 59.4 in January. U.S. Bureau of Labor Statistics data indicate that over the last 12 months, Colorado’s Rural Mainstreet has experienced a solid 1.5% gain in nonfarm employment (non-seasonally adjusted).

The February RMI for Illinois climbed to 73.7 from 70.7 in January. The farmland-price index dropped to 83.4 from 91.7 in January. The state’s new-hiring index advanced to 67.1 from January’s 65.7. U.S. Bureau of Labor Statistics data indicate that over the past 12 months, Illinois’ Rural Mainstreet has experienced a strong 4.4% gain in nonfarm employment (non-seasonally adjusted).

The February RMI for Iowa fell to 62.0 from 71.8 in January. Iowa’s farmland-price index declined to 79.8 from January’s 89.4. Iowa’s new-hiring index for February slipped to 62.7 from 62.8 in January. U.S. Bureau of Labor Statistics data indicate that over the past 12 months, Iowa’s Rural Mainstreet has experienced a healthy 2.7% gain in nonfarm employment (non-seasonally adjusted).

The Kansas RMI for February improved to 59.2 from January’s 58.3. The state’s farmland-price index fell to 61.6 from January’s 90.2. The new-hiring index for Kansas increased to 61.6 from 61.0 in January. U.S. Bureau of Labor Statistics data indicate that over the past 12 months, Kansas’ Rural Mainstreet has experienced a healthy 2.8% gain in nonfarm employment (non-seasonally adjusted).

The February RMI for Minnesota soared to 89.0 from 81.2 in January. Minnesota’s farmland-price index declined to 88.1 from January’s 95.0. The new-hiring index for February rose to 73.0 from 69.7 in January. U.S. Bureau of Labor Statistics data indicate that Minnesota’s Rural Mainstreet economy has experienced a spectacular 10.6% gain in its nonfarm employment (non-seasonally adjusted).

The February RMI for Missouri dropped to 60.5 from 61.8 in January. The farmland-price index sank to 81.5 from January’s 89.0. The state’s hiring gauge expanded to 64.8 from January’s 62.3. U.S. Bureau of Labor Statistics data indicate that Missouri’s Rural Mainstreet economy has experienced a very healthy 4.2% gain in its nonfarm employment (non-seasonally adjusted).

The Nebraska RMI for February dropped to 62.6 from January’s 64.6. The state’s farmland-price index slumped to 80.0 from last month’s 89.8. Nebraska’s new-hiring index slumped to 62.9 from 72.3 in January. U.S. Bureau of Labor Statistics data indicate that Nebraska’s Rural Mainstreet economy has experienced a solid 2.2% gain in its nonfarm employment (non-seasonally adjusted).

The North Dakota RMI for February grew to 54.8 from 50.3 in January. The state’s farmland-price index declined to 77.6 from 85.4 in January. The state’s new-hiring index declined to 59.9 from January’s 65.1. U.S. Bureau of Labor Statistics data indicate that North Dakota’s Rural Mainstreet has experienced a 1.6% gain in its nonfarm employment (non-seasonally adjusted).

The February RMI for South Dakota sank to 48.0 from 51.8 in January. The state’s farmland-price index fell to 75.5 from 85.9 in January. South Dakota’s February hiring index improved to 57.3 from 52.3 in January. U.S. Bureau of Labor Statistics data indicate that South Dakota’s Rural Mainstreet has experienced a loss of 0.3% of its nonfarm employment (non-seasonally adjusted).

The February RMI for Wyoming expanded to 50.5 from 49.2 in January. The February farmland and ranchland-price fell to 76.3 from 89.4 in January. Wyoming’s new-hiring index increased to 58.3 from January’s 57.5. U.S. Bureau of Labor Statistics data indicate that Wyoming’s Rural Mainstreet has experienced a 1.3% gain in its nonfarm employment (non-seasonally adjusted).