Bankers expect recession, strong farm income growth

Bankers are predicting a recession along with strong growth in farm income, according to June’s Creighton University Rural Mainstreet Index. 

The overall index fell approximately eight points to 49.8 this month, the first time it’s fallen below the growth-neutral mark of 50 since September 2020. The index, which tracks bank CEO sentiment in rural areas dependent on agriculture and/or energy, dropped in all of the states it covers: Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming. 

Surging energy prices and agricultural input costs stunted the business confidence index to just under 34, its lowest level since May 2020. Labor shortages continued in the region as the new hiring index fell from 61.5 in May to 57.4 this month. However, non-farm employment has risen 2.6 percent over the last 12 months. 

  According to the report, more than nine-in-10 bankers rank recession risk at above 50 percent. “Much like the nation, the growth in the Rural Mainstreet economy is slowing,” said Ernie Goss, Jack A. MacAllister chair in regional economics at Creighton’s Heider College of Business. “Supply chain disruptions from transportation bottlenecks and labor shortages continue to constrain growth. Farmers and bankers are bracing for escalating interest rates — both long-term and short-term.” 

Farm financial conditions remain strong: Bank CEOs on average expect net farm income for grain farmers to be 12.6 percent above 2021 levels. The region’s farmland price index increased nearly five points to 76.8 this month, marking the 21st straight month that the index has been above growth-neutral. The farm equipment-sales index increased 4 1/2 points to 71.4 in June. Pushed by an increase in ag equipment costs, June’s loan volume index increased 5 1/2 points to 78.5, its highest reading since May 2019.