Area Economic Index at its highest since April 2008
Mar 22, 2010
The overall Rural Mainstreet Index (RMI) continued its climb to a nearly two year high this month, according to Creighton University’s March survey of bank CEOs in an 11-state region. The RMI rose to 47.4, which is still below the growth neutral 50.0. The farm equipment index fell while the farmland price index continued its rally. The confidence index, which estimates the economy six months out, continued to remain growth positive for the sixth consecutive month at 54.3. The loan volume index increased above growth neutral to 55.2 for the first time since last June.
The farmland price index increased to 58.2, continuing a four-month rally to a 17-month high, but it marks just the second consecutive month above 50.0. 24% of bankers that were surveyed expect farm and ranch land prices to decline over the next six months while 14% expect prices to increase. All of the surveyed states had farmland price indexes above 50.0 while Nebraska and South Dakota had indexes in the 60’s.
The farm equipment sales index slipped for the second straight month to 41.4 from January’s 15-month high of 47.2. “I expect farm equipment sales to pick up as the farm and ranch economies improve in the months ahead,” said economist Ernie Goss of Creighton University. Goss and Bill McQuillan, CEO of CNB Community Bank of Greeley, Nebraska created the monthly economic survey back in 2005.
Lending has started to pick up on Rural Mainstreet according to the loan volume index. The index increased to a 9-month high of 55.2 and it is the first time the index is above 50.0 since June 2009. The checking-deposit index increased to 56.2 and the certificates of deposit index rose to 54.4 in March.
The RMI revealed some important information this month. Every index increased besides a 1.0 decrease in farm equipment sales, which Professor Goss expects to increase soon. The Rural Mainstreet economy looks like it has been making a strong recovery lately with so many indexes reflecting positive growth.
Although 24% of bankers expect a decline in farmland prices, the majority of bank CEOs (62%) expect stable farmland prices over the next six months. 14% still feel that prices will continue to increase. Farmland prices have shown how they can overcome hard economic times by stabilizing when many other asset classes decreased in value. If farmland prices remain steady or decrease, expect more investor interest because it would be such a rare occurrence. Farmland is a tangible asset with a very limited supply which makes it such a unique investment.
Remember to visit Farmland Forecast (farmlandforecast.colvin-co.com) for your daily update on news and research about agriculture and farmland.