Considering the breath-taking explosion in the price of farmland in 2011, this should come as no surprise. A recent survey by midwestern bankers suggests the rural economy is leveling off. The survey in question is the monthly Mainstreet Economy survey conducted by Creighton University economics professor Dr. Ernie Goss. Frequent readers of Your Precious Land have seen our previous coverage of this leading-indicator survey as it attempts to monitor conditions in rural communities and rural community banks across 10 Midwestern states.
The current survey finds the Rural Mainstreet Index (RMI) rose in January and is at its highest level since June 2007. Overall: The Rural Mainstreet Index (RMI), which ranges between 0 and 100, advanced to 59.8 from 59.7 in December. However, 26% of survey respondents rated a decline in commodity prices as the largest threat to the rural mainstreet economy. Survey supervisor Goss said, "We are detecting a leveling off in the growth of the Rural Mainstreet economy. While slower global economic growth, higher energy costs, and softer agriculture commodity prices will mean somewhat slower growth for the first few months of 2012, our surveys continue to show healthy growth for the area."
After rising to a record level for December, the farmland price index fell to a still healthy reading for January. The index for January sank to 74.3 from 84.1 in December. This is the 24th straight month the index has been above growth neutral. The farm equipment sales index slipped to 72.3 from 73.8. "Very healthy farm income has encouraged farmers to purchase new equipment and to expand operations. This has pushed up farm land prices at rates that are, in my judgment, unsustainable in the long run. Air will come out of the farmland price bubble when agriculture commodity prices soften in the months ahead," said Goss.
Bankers reported on likely outcomes from the end of the blender’s tax credit for corn-based ethanol at the end of 2011. Almost one in 10, or 9 percent, expect the termination of the credit to have significant negative impacts on the Rural Mainstreet economy. However, a majority, 51 percent, anticipate that the ending of the tax credit will have a modest negative economic impact. The remaining 40 percent expect only slight or no negative impacts. None of the bankers reported a positive impact due to the expiration of the credits.
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