Weak ag commodity prices, falling equipment sales and declining farm exports pushed the sentiment of bank CEOs to its lowest mark since last November, according to Creighton University’s July Rural Mainstreet Index.
The index fell to 41.3 from 41.7 in June, according to Creighton’s survey of rural bank CEOs in a 10-state region dependent on agriculture and/or energy.
Pessimism for regional economic growth reigns among rural bankers. The July confidence index, at 28.3, hit its lowest level this year. More than half identified a recession as the greatest regional economic risk for the next year. Twenty-six percent said increased inflation poses the greatest risk; 17.4 percent named a debt crisis; and 4.4 percent specified few or no impending economic risks.
Farmland prices rose above growth neutral during July, increasing to 52.2 from June’s 49.9. However, bankers on average expect a 3.4 percent drop in farmland prices over the next year.
Agricultural and livestock exports were down 3.6 percent to-date in 2024 from the same period last year, according to the International Trade Association. The farm equipment sales index fell to a more than seven-year low of 19.0 from 31.8 in June. “Higher borrowing costs, tighter credit conditions and weak grain prices are having a negative impact on the purchases of farm equipment,” said Ernie Goss, chair in regional economics at Creighton University’s Heider College of Business.
The loan volume index fell to 67.4 from 79.2 in June, while the checking deposit index increased to 45.5 this month from 34.8. The index for certificates of deposits and savings instruments increased to 65.9 from 63.0.
Nearly half of bankers advocated the Federal Reserve enact two rate cuts of one-quarter of one percentage point this year.
Other report findings included:
- The home sales index plummeted almost thirty points to July’s 33.3. Retail sales sit at 39.1, down from June’s 41.3. “High consumer debt, elevated interest rates and weaker farm income are cutting into retail sales,” Goss said.
- The new hiring index for July improved three points to 50.0.