40% of Rural Bankers Peg Loan Defaults as 2019's Biggest Challenge

January 23, 2019 05:00 AM
The January 2019 Rural Mainstreet Index (RMI) reveals the rural economy is seeing continued neutral growth.

The January 2019 Rural Mainstreet Index (RMI) reveals the rural economy is seeing continued neutral growth. The monthly survey of bank CEOs in a 10-state Midwest region dropped to 51.5 for this month. In December 2018, the index was 54.2. January marks the 11th time in the past 12 months the index has been above the growth-neutral rating of 50.

“Our surveys over the last several months indicate the Rural Mainstreet economy is expanding outside of agriculture,” says Ernie Goss, who chairs Creighton’s Heider College of Business and leads the RMI. “However, the negative impacts of tariffs and low agriculture commodity prices continue to weaken the farm sector." 

Bank CEOs were asked what they expected to be the biggest economic challenge for agriculturally dependent community banks in 2019. The results were:

  • Rising loan defaults: 42.9%
  • Competition from Farm Credit: 14.3%
  • Falling farmland values: 11.6%
  • Low loan demand: 11.4%
  • Rising regulatory costs: 5.7%

Bank CEOs were also asked: How would you describe the economy in your area? Slightly less than half of respondents, 45.7%, reported little or no growth, while 31.4% reported modest economic downturn. The remaining bankers, 22.9%, reported modest economic growth. 

Tariffs, trade tensions, weak agriculture commodity prices and the partial federal government shutdown negatively influenced the economic outlook of bank CEOs, Goss says. 

The farmland and ranchland-price index for January increased to 37.9 from 35.7 in December. This is the 62nd straight month the index has fallen below growth neutral 50. 

Read a Q&A with Ernie Goss, The Man Behind the Rural Mainstreet Index

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Spell Check

Ankney, IA
1/24/2019 08:37 AM

  Good post, Flying Farmer. Chuck, you scare me. Do you think ANY market looks the same 8 years later? Do you go into your input supplier whether it be seed, fert, equipment, whatever and try to negotiate prices from years ago? I bet that goes over nicely. Fred: How long could America continue with a $500 billion trade deficit? Bryce Knorr with Farm Futures posted recently that overall exports are not that bad. What's bad is record crop after record crop. Then we have the seed giant, Bayer, working on products that will help South American farmers increase production further by creating soybeans resistant to the problem insects and diseases they face. We are drought proofing corn hybrids to the point we can grow corn in Texas without irrigation. New soybeans are coming that will be insect resistant. There was a test farm in Illinois that averaged 337 bu corn and 112 bu beans. I have two farms that in the past have yielded 296 bu corn (68 acres) and 97 bu beans (118 acres) and I don't feel I did anything over and above just doing the basics correctly. Its good soil, but its got to be the genetic progression we've made. We're just producing more than we need at this point.

Midtown, MS
1/24/2019 11:25 AM

  Fred T: The majority of Americans felt like Trump was the better choice of the two, I'd gladly agree. What's not making the liberal news because its concerning your liberal buddy Hillary, she's under investigation. Out of country donations to her "foundations" are under scrutiny as well as her contact history with shady overseas people. Where the hell do think Hillary is these days? She's not got her ugly face plastered in front of cameras. She's trying to defend her under the table, corrupt campaign and business deals. If the criminal system does its job, she'll be the one sweeping toilet stalls and practicing ink pen tattoos in C block. Its not a fault of Trump if we over produce our products and run the price down. Its not Trumps fault that China has run amok for years on terrible trade deals that needed terminated. Its not Trumps fault that your pals Schumer and Pelosi will sell out the American people and their own party to do anything and everything to hinder Trumps effort trying to work with them! I bet I'm not the only one that gets sick and tired seeing your little tirades bashing Trump for everything wrong in your life.

Ames, IA
1/25/2019 06:38 AM

  At end of the day it's supply and Demand and ability to Mitigate Risk or better yet pull the trigger! Producer's are their own worse enemy when it comes to risk mitigation, we hate to leave any money on the table! Until we understand the tools available in supporting your floor with what ever commodity you produce along with tapping into upside potential then you're one being discussed in this article. Technology and weather supports grain's ability to grow market share elsewhere, look at S. America and what are you going to do if we figure out how to grow grains in Africa and other countries, not far away. S. America will take over US in bean harvest sooner than later. US has infrastructure, land, water, and market mitigation tools along with opportunities to diversify as in organic, natural, and other crops besides normal corn/beans, etc. Other countries have parts of these. American Farmer needs to look in the mirror and ask the following: "Am I a good farmer who cares for the land and raising the best crop I can with the technology available to me in a responsible manner?" or "Am I good farmer who cares for the land and raising the best crop I can with the technology available to me in a responsible manner while mitigating risk for long-term growth and next generation's ability to take over?" Both questions can be answered with "yes" while only one will have opportunity to survive in this volatile market! Collaborate with all commodity groups, educate self in risk tools that fit your business, review options that diversify your business from others, become a better Business Manager then the farmer in you will be easier.


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