More than 75 percent of bankers reported negative COVID-19 economic impacts on their local economy, according to the monthly Rural Mainstreet Index. Overall, the August RMI ticked up a few basis points to 44.7, the sixth straight month below growth-neutral 50. It was up from April’s low point of 12.1, however. One in six respondents said they expect farm loan defaults to climb by an average of 15 percent over the next 12 months.
Borrowing by farmers expanded for August, but at a slower rate than in July. The borrowing index fell to 53.9 from July’s 57.4. The confidence index, which reflects bank CEO expectations for the economy six months out, improved to 44.6 from July’s 43.9. “COVID-19 related farm support payments have boosted confidence, partially offsetting pessimism from weak agriculture commodity prices, frail retail sales, and August storms,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.
Approximately 46 percent of bank CEOs with ethanol plants in their area reported temporary shutdowns. The remaining 54 percent reported ethanol production expanding at a slow pace.
For only the second time in the last 81 months, the farmland price index moved just above growth neutral with an August reading of 50.1, up from July’s 45.6. The August farm equipment-sales index fell to 32.8 from 34.4 in July. This marks the 83rd straight month the reading has remained below growth neutral 50.0.
“Farm commodity prices are down by 10.4 percent over the last 12 months. As a result, and despite the initiation of $32 billion in USDA farm support payments in 2020, only 8 percent of bankers reported their area economy had improved compared to July, while 18.4 percent said economic conditions had worsened,” Goss said.
The RMI surveys community bank presidents and CEOs each month in nonurban agriculturally and energy-dependent areas regarding current and projected economic conditions in their communities. Bankers come from about 200 small towns with an average population of 1,300 in 10 states: Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming.