Marc Schober is the editor of Farmland Forecast an educational blog devoted to investments in agriculture and farmland.
Early Planting Is Driving the Rural Economy
May 23, 2012
The Rural Mainstreet Index (RMI) increased slightly this month as bankers are optimistic about the agriculture environment with historically early planting and above average crop conditions. The farmland price index declined in May, indicating slower growth in values, but remained above growth neutral for the 28th consecutive month.
The Rural Mainstreet Index increased to 58.5, a slight increase from the 57.1 in April. month. This marks the ninth straight month the RMI has been above growth neutral.
According to Creighton University economist Ernie Goss, "Even though downturns in energy prices are a positive for the Rural Mainstreet economy, I expect softer agricultural commodity prices and slower global economic growth to restrain growth in the months ahead."
Planting has taken precedence in the agricultural realm resulting in a decrease in farmland sales volume. Although the farmland price index decreased it remains above growth neutral, posting a 64.6 from a 69.4 in April. This marks the 28th straight month the index has been above growth neutral. The farm equipment sales index increased to 65.1 from April's 62.4.
"Economic growth among countries importing U.S. food, along with the Federal Reserve’s cheap money policies, continue to boost farm income and support higher prices for agricultural land and increasing sales of farm equipment," said Goss.
Bankers were asked this month in regards to the trends in financing of farmland in the past year. 34% indicated that farmland purchases using financing had declined in the past year and only 11% said it had increased. "Very strong farm income has allowed farmers to pay cash for their farmland purchases," said Goss.
For the third consecutive month the loan volume index has increased to 56.9 from 52.8 a month prior. The check deposit index decreased to 62.9 from 72.6 in April and the certificate of deposit and savings instruments decreased to below growth neutral to 41.7 from 53.5 in April.
May's hiring index decreased to 59.2 compared to 59.3 in April. "Job growth across the Rural Mainstreet economy is showing a lot of variation with areas with significant energy exposure performing much better than more agriculturally dependent areas. For example, rural areas of Colorado and North Dakota experienced much better job growth than Missouri and Nebraska," said Goss.
The economic confidence decreased to 60.2 from April's 60.6. "Even with the negatives coming out of Europe and U.S. economic questions surfacing, Rural Mainstreet bankers remain very optimistic about the economic future of their local economies," said Goss.
This survey represents an early snapshot of the economy of rural, agriculturally 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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