Could a slow turnaround be in sight for the rural economy? Possibly, according to the Rural Mainstreet Index (RMI). The monthly survey of bank CEOs in a 10-state Midwest region marked the fourth time in the past five months that the overall index has risen above growth neutral.
For November, the RMI rose to 54.2 from October’s 51.4. The November rating, although still weak, is the highest reading for 2019. The index ranges between 0 and 100, with 50 representing growth neutral.
“Federal agriculture crop support payments and somewhat higher grain prices have boosted the Rural Mainstreet Index slightly above growth neutral for the month,” says Ernie Goss, who chairs Creighton’s Heider College of Business and leads the RMI. “Given a continued weak rural economy, bank CEOs, on average, expect holiday buying to increase by only 1.3% above last year’s levels.”
Even though yields are coming in better than expected, they are still down from previous years.
“Harvest is largely complete in our area,” adds Jim Eckert, president of Anchor State Bank in Anchor, Ill. “Corn is down slightly in yields from recent years. Soybean yields are down 10% to 20%.”
“The latest harvests are showing significant declines in test weights leading to the point that 2019 harvest production looks to be running below average,” reports Jeff Bonnett, president of Havana National Bank in Havana, Ill.
“After the wet spring and wind this summer and fall, the corn was down and hard to combine and the yields are down with the corn,” says Lonnie Clark, president of the State Bank of Chandler, Minn.
The confidence index, which reflects bank CEO expectations for the economy six months out, increased to a still -weak 44.4 from October’s 36.5, and continues to indicate a very negative economic outlook among bankers.
“The trade war with China and the lack of passage of the USMCA (NAFTA’s replacement) are driving confidence and the economic outlook lower for most areas of the region,” Goss says.
“The Democrats impeachment debacle is putting a negative damper on the country and hurting peoples’ outlook,” adds Joseph Anglin, CFO of the Pioneer Bank & Trust in Black Hills, S.D. “Hopefully when their process is done, our customers outlook will improve again from the current damper.”
Other highlights from the November report:
- Bankers report 16.7% of farmers and 5.5% of business owners in their area had no organization succession plan.
- The farmland and ranchland-price index for November increased slightly to a weak 40.4 from October’s 40.3. This is the 72nd straight month the index has remained below growth neutral 50.
- The November farm equipment-sales index declined to 37.5 from October’s 39.7. This marks the 74th month the reading has remained below growth neutral 50.
Meet the man behind the Rural Mainstreet Index: Ernie Goss.