Creighton University’s Rural Mainstreet Index reported that the overall confidence in the rural economy is the highest it’s been since May, 2014. The RMI improved eight points from January’s report, increasing to 54.8, according to February’s monthly survey of bank CEOs in the agriculture-dependent, 10-state Midwest region. The uptick surprised Ernie Goss, regional economics chair at Creighton’s business college, given that fewer than one in four bankers reported economic growth in their area.
“Weak agriculture commodity prices continue to weigh on the rural economy,” Goss said in a news release. The report also indicated that almost two-thirds of bankers and CEOs generally expect a decline of 7 percent in farm equipment sales in 2018. The farm equipment sales index, however, increased nine points to 33.8 in February from 24.4 in January, but still hovers dismally below growth neutral for the 54th consecutive month. The index ranges between zero and 100, with 50.0 representing the growth neutral.
Borrowing by farmers took a slight hit, according to the report, dropping to 53.8 in February from 54.4 in January. When bankers were asked how they’re dealing with the weak farm income, 45 percent said they increased collateral requirements, and one in five said they were rejecting more loan applications.
One third of respondents reported that they weren’t changing their farm-lending practices, however, and plan to stick with their customers through the slump. “Our response to a weak farm economy is to continue working closely with our customers to get them through the tough times, just like we’ve always done,” said Jeffrey Gerhart, chairman of Bank of Newman Grove, Neb.
Jim Eckert, president of Anchor State Bank, Anchor, Ill., said, “We are seeing farmers with somewhat reduced income and moderate operating loan carryovers. However, without rain prior to planting, 2018 could be a bad year.”
Though economic optimism is on the rise from January, lifting above neutral to 52.4 in February, Goss insisted, “an unresolved North American Free Trade Agreement, a weak USDA 2018 farm income projection, and anemic agriculture commodity prices continue to undermine economic optimism.”