Marc Schober is the editor of Farmland Forecast an educational blog devoted to investments in agriculture and farmland.
Rural banker’s confidence increases in October
Oct 20, 2009
Rural community bankers are confident that their economies will soon turn around, according to increases in the Rural Mainstreet Index. The confidence index, which gives an outlook on the rural mainstreet economy six months out, rose above neutral growth to 58.7 this month. An index of 50 indicates neutral growth. Even though indexes are increasing, economist and founder of the RMI, Ernie Gross noted that the rural mainstreet economy is still weak.
The overall, combined RMI rose to a frail 37.5 from 36.5 last month. The index has been below growth neutral for 20 straight months now, but certainly higher than its record low in February 2009 of 16.9.
Farmland prices have remained steady. This month, the farmland price index increased from 41.1 to 43.0. The index has been below neutral growth for 12 consecutive months. There have been isolated farmland sales that have been relatively high though; Nebraska recently had farmland sell for $6,650 an acre.
The confidence index reflects banker’s outlook six months from now. This month, the index increased over 15 points from 43.5 to 58.7. The index is the highest it has been since July of 2007.
The small increase of many indexes this month, along with the large increase of the confidence index, is a sign that rural economies are slowly coming back. An increase in the confidence index of 15 points is significant, but it is still only slightly above growth neutral.
Bankers were asked how much of an increase in FDIC fees they have experienced this year. Banker’s average increase in fees was 320% compared to last year. In addition, the FDIC has purposed fees to be prepaid for 2010-2012, which could make things difficult for small community banks.
The farmland price index has remained below growth neutral, but now is the selling season for farmland. In the upcoming few months, the farmland price index will accurately reflect farmland sales since there will be more sales to take into consideration.
The Rural Mainstreet Indexes are compiled from a survey of small community bank CEOs from an 11-state region.
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