Crop Prices Struggle Under Strong U.S. Dollar

Published on: 15:03PM Apr 20, 2015

Rural bankers remain pessimistic about their local economy, primarily due to the strong U.S. dollar that continues to hamper domestic crops sales on the global market. Respondents in this month’s survey suggested farmland prices were declining more quickly than in past months, although when asked about local cash rent values, bankers reported a 6% increase from rents reported in January.

The Rural Mainstreet Index (RMI), an index which ranges from 0 to 100 with 50.0 representing growth neutral, increased in the April report to 46.0, from 43.6 in March. Ernie Goss, Ph.D, Economics Professor at Creighton University stated, “The stronger U.S. dollar continues to be a drag on the Rural Mainstreet economy.” 34% of bankers described the impact of the strong U.S. dollar as “Negative,” with the remainder describing the impact as “Little or small,”

RIM_April-2015_Rural_Mainstreet_index_Colvin___Co._LLP_Greyson_Colvin_Marc_Schober_Patrick_Cheney_John_Fairbairn_Farmland_Forecast

Source: Rural Mainstreet Index Creighton University

The farmland price index decreased to 33.4 from 39.4 in March. “Even though crop prices have stabilized, demand for farmland was weak, pulling agricultural land prices down again. This is the 17th straight month the index has moved below growth neutral,” said Goss.

As planting season begins, farmland sales and auctions have slowed, but realtors in Illinois, Iowa, and southern Minnesota have suggested that over the past six weeks farmland available for sale and farmland auction attendance has been well above average. Historically the majority of farmland transactions occur immediately following the fall harvest. The delayed harvest in fall 2014 caused a slight shift in the majority of farmland transaction to later in the winter months. 

RIM_April-2015_Farmland_Price_index_Colvin___Co._LLP_Greyson_Colvin_Marc_Schober_Patrick_Cheney_John_Fairbairn_Farmland_Forecast

Source: Rural Mainstreet Index Creighton University

The farm equipment sales index increased to 15.6 from 15.2 in February. Farm equipment has been the largest casualty of the latest decline in farm incoming the past year. Tighter profit margins have forced farmers to be extremely frugal and cut back on a number of amenities, including farm equipment.

This month bankers were asked, “What is your estimate of the average per acre cash rent for non-irrigated crop land in your area?” The average response was $227, a 6% increase from what was reported in the January 2015 report.

 

Table 1: Rural Mainstreet Economy Last Two Months and One Year Ago: (index > 50 indicates expansion)

 

April 2014

March 2015

April 2015

Area economic index

53.2

43.6

46.0

Loan volume

73.1

64.9

69.0

Checking deposits

65.1

56.4

50.1

Certificates of deposit and savings instruments

42.0

44.7

38.0

Farmland prices

42.9

39.4

33.4

Farm equipment sales

36.7

15.2

15.6

Home sales

63.8

55.5

58.2

Hiring

64.0

52.2

54.2

Retail business

50.0

40.4

44.0

Confidence index (area economy six months out)

54.0

47.8

47.0

 

Source: Rural Mainstreet Index Creighton University

Survey

This survey represents an early snapshot of the economy of rural, agricultural 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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