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Farmland Forecast

RSS By: Marc Schober, AgWeb.com

Marc Schober is the editor of Farmland Forecast an educational blog devoted to investments in agriculture and farmland.

Rural Economy Continues to Grow Despite Decline in Grain Prices

Jun 24, 2014

The growth in the rural economy was slowed by falling grain prices over the last month. Farmland prices continue to decline according to the respondents, but they are expected to show signs of increasing by next month. Investors are reportedly purchasing a smaller share of farmland compared to the same time last year.                                                                

The Rural Mainstreet Index (RMI), ranging between 0 and 100 with 50.0 representing growth neutral, decreased to 53.6 from 55.6 in May. The RMI has remained above growth neutral since March. RMI levels are short of where they were last year, but this should be expected with crop prices significantly lower than this time last year.

Ernie Goss, Ph.D, Economics Professor at Creighton University stated, "The overall index for the Rural Mainstreet Economy indicates that economic conditions of the areas of the nation highly dependent on agriculture and energy are positive, but somewhat weaker compared to this time last year."

RIM June 2014 Rural Mainstreet index

Source: Rural Mainstreet Index Creighton University

The farmland price index increased to 49.1 from 46.7. This is the fourth consecutive month that the index has increased, though the index remains below growth neutral. Goss is confident the index will continue to rise. "Stronger farm commodity and grain prices over the last several months appear to have put a floor under farmland prices. I expect the index to move above growth neutral next month."

RIM June 2014 Farmland Price index

Source: Rural Mainstreet Index Creighton University

The farm equipment sales index increased to 35.0 from 33.6. Goss said, "Despite improving economic activity on the regional farm, agriculture equipment and implement dealers in the region are experiencing very weak sales to farmers in the region. On the other hand, farm equipment manufacturers continue to experience positive growth due to healthy sales abroad."

This month bankers were asked what percentage of farmland purchases were cash sales and what percentage of farmland sales were made to non-farmer investors. Bankers reported that farmland purchased by cash fell 5% from last year, suggesting purchasers are using more debt to finance farmland purchases. The report also showed that the share of land sold to non-farmer investors fell from 19.7% in 2013 to 14.4% in 2014.




Table 1: Rural Mainstreet Economy Last Two Months and One Year Ago: (index > 50 indicates expansion)

 

June 2013

May 2014

June 2014

Area economic index

60.5

55.6

53.6

Loan volume

66.7

75.4

74.6

Checking deposits

48.5

54.8

50.9

Certificates of deposit and savings instruments

33.6

40.3

39.4

Farmland prices

58.4

46.7

49.1

Farm equipment sales

53.2

33.6

35.0

Home sales

78.1

63.9

66.1

Hiring

61.4

64.0

63.2

Retail business

53.9

51.7

51.8

Confidence index (area economy six months out)

60.0

51.6

55.5

Source: Rural Mainstreet Index Creighton University

Survey

This survey represents an early snapshot of the economy of rural, agricultural and energy-dependent portions of the nation. The RMI is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. It gives the most current real-time analysis of the rural economy. 

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