RMI Reveals Greatest Banking Threat is Farm Foreclosures

October 19, 2017 09:50 AM
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The Rural Mainstreet Index (RMI) released each month by Creighton University is becoming a broken record when describing the farm economy - the overall index remaining below growth neutral. The bright spot in the September RMI is the index saw slight improvements, jumping from 39.6 in September to 45.3 in October.  Every state showed a boost in the RMI, except Missouri, where the index slipped to 49.2 from 51.3

The RMI is a survey of ag bankers in a 10-state region. While October’s number showed outlooks are on the rise, it’s the struggling farm economy due to stagnant crop prices acting as a wet blanket on the overall RMI.

“As a result of weak farm income and low agriculture commodity prices, approximately 9.5 percent of bank CEOs expect farm loan foreclosures to pose the greatest threat to banking operations over the next five years,” said Ernie Goss, author of the RMI.

The survey showed almost one in 10 bankers expect farm foreclosures to be the greatest challenge to banking operations over the next five years.

“I don't think the bottom is in in terms of for example foreclosures and delinquencies and bankruptcies,” said Goss. “I think still we've got a bottom there ahead of us.”

Surveyed lenders are also keeping a close eye on the Federal Reserve and a possible additional rate hike during the December meeting.

“Rural Mainstreet bankers have been generally supportive of Federal Reserve rate hikes,” said Goss. “Approximately 64.3 percent anticipate one more 2017 rate increase.”

As combines roll across rural America, ag bankers also reporting a mixed back with harvest results. That’s also bleeding over into mixed financial outlooks, especially as basis varies.  The RMI asked bankers to compare current spot prices for a bushel of corn to the average break-even price.

The survey showed only 2.4 percent of bankers indicated that prices between $3.50 and $3.75 were above break-even levels, whereas 45.2 percent of those bankers say current spot prices are below break-even.

“Where can I find a spot price for corn of $3.50 or above today?” said Fritz Kuhlmeier, CEO of Citizens State Bank in Lena, Ill. “Try $3.00 to $3.20, which is below the break-even by all means.”

“Break-even prices vary from farmer to farmer. (It) depends upon the debt carried by the farmer. It’s all about their cash flow, said Jeffrey Gerhart, president and chairman of the Bank of Newman Grove in Newman Grove, Neb.

The latest RMI also showed pressured equipment sales, with the agriculture equipment sales index falling below growth neutral for the 50th straight month. Average farmland prices in the 10-state region also growing weaker, falling for a 47th straight month. 

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Spell Check

Cayuga , IN
10/19/2017 09:32 PM

  Geez, the American farmer is not breaking even. Will the mainstream media ever show our plight? Of course not, it would embarrass the big grain traders. A bushel of corn weighs 56 pounds. The farmer gets $3.20 a bushel. Frito Lay gets $4.00 for 13 ounces. The math is lousy. If only the farmer could go on strike. A new appreciation for food would evolve.

Senior PA Dairy Farmer
Westfield, PA
10/20/2017 01:40 PM

  Dennis, you nailed it. The mainstream "farm/rural" press is full of the propaganda (aka "mind control") being promulgated by the BIG AG/ BIG DAIRY/ BIG FOOD "Free Trade" speculators whose global corporate special interests are the beneficiaries of the low farm/ranch commodity prices on US farms and ranches. These "journalists" continue to lead us by the snout down the broad road into the "New World Order" slaughter pen where our national sovereignty is butchered with every "Farm" Bill and every other global "deal" the politicians commit us to, including the trade "Agreements," none of which "they" ever vet by "We The People." "We" better realize PDQ---because it is fast becoming too late!--- that we must have American "cost of production" on US farms/ranches---or BUST. DC politicians---both parties--- are keeping us in the "Bust" cycle. This is the reason we are facing this chronic, severe, rural socio-economic calamity. Under these disastrous bi-partisan policies, we will continue to lose our FARMERS and the independent rural communities that depend on them for survival. Farmers better get this straight: without "cost of production," there is no private property or self-determination for farmers and ranchers. This is supposed to be the USA with a red, white, and blue Constitution, but you can't tell that from the failed policies the Senate and House Ag Committees keep foisting on us with full approval from “the Administration,” no matter who is in The White House!

Eastern, NE
10/21/2017 10:16 AM

  I estimate farmers are less than 1% of the population today, but we still support 20% or more of the population. More if we consider the managed money involved in the markets. When was the last time the farmer got paid every two weeks like the people we support? We're forced to overproduce to survive. What's the answer? I don't think anyone knows. I have ideas, but so do others. We might have to take a step back and all of us be totally diversified with livestock, grains and some sort of garden produce that a local market supports. This downturn will be just as painful a year from now as it was in the 80's.


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