Demand for farmland continues to turn downward, according to a monthly survey of rural bank CEO's conducted by Dr. Ernie Goss of Creighton University. The most recent survey found the survey's farmland and ranchland-price index plunged to 43.8, its lowest level since October 2009, and was down from December's 47.0. The index ranges from 0 to 100, with 50.0 representing growth neutral.
"This is the second straight month that the farmland and ranchland-price index has moved below growth neutral. As agriculture commodity prices have moved lower, so have farmland prices. On the other side of the economic coin, ranchers and livestock producers are experiencing record prices and a very healthy economic outlook," says Goss.
Farm equipment sales remained below growth neutral for the seventh straight month. The January index sank to a weak 41.0, the lowest reading since October 2009, and down from December's 44.3. "Over the past year, commodity prices for all farm products have declined by roughly 8%. This has significantly reduced farmers' willingness to undertake major agriculture equipment purchases," states Goss.
Each month, community bank presidents and CEOs in nonurban, agriculturally and energy-dependent portions of a 10-state Midwestern area are surveyed regarding current economic conditions in their communities and their projected economic outlooks six months down the road. Bankers from Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming are included. This survey represents an early snapshot of the economy of rural, agriculturally and energy-dependent portions of the nation. The Rural Mainstreet Index (RMI) is a unique index focuses on approximately 200 rural communities with an average population of 1,300. It gives the most current real-time analysis of the rural economy.
The Rural Mainstreet Index fell to 50.8 from December's much healthier to 56.1, says Goss. "The overall index for the Rural Mainstreet Economy continues to indicate that the areas of the nation highly dependent on agriculture and energy continue to expand at a positive but slower pace. Over the past year, corn, soybean and wheat prices have declined by 41%, 10% and 16%, respectively. Weaker farm prices are clearly negatively influencing the rural economy. Additionally, almost 80% of bank CEOs expect the EPA's cut in ethanol blending level to negatively affect the Rural Mainstreet economy," notes Goss.
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