Rural Mainstreet Index Hits Record High
Last April, in the thick of the economic disruption caused by the COVID-19 pandemic, the Rural Mainstreet Index (RMI) sank to 12.1.
A year later, the index for March soared to a record high 71.9. March represents the fifth time in the past six months the RMI climbed above growth neutral. February’s RMI was a solid 53.8. The index ranges between 0 and 100, with 50 representing growth neutral.
Can the tide finally be turning for the rural economy?
More than two-thirds of bankers reported an expanding local economy. The remaining 31% indicated little or no growth.
“Sharp gains in grain prices, federal farm support and the Federal Reserve’s record-low interest rates have underpinned the Rural Mainstreet Economy,” says Ernie Goss, who chairs Creighton’s Heider College of Business and leads the RMI. “Only 3.1% of bank CEOs indicated economic conditions worsened from the previous month. Even so, current rural economic activity remains below pre-pandemic levels.”
The farmland and ranchland-price index for March dipped to 46.6, from February’s 46.8. This is the 75th time in the past 76 months the index has been below growth neutral.
For a sixth straight month, the farmland price index advanced above growth neutral. The March reading climbed to 71.9, its highest level since November 2012, and up from 60 in February. This is first time since 2013 the RMI has recorded six straight months of farmland prices above growth neutral.
“Higher grain prices will increase land prices and cash rent, but these long-term decisions are based on short-term conditions that can change and undermine the cash flow,” reported Lonnie Clark, president of the State Bank of Chandler in Minnesota.
Bankers reported that about 12.3% of farmland sales were cash sales, which is down from 17.3% recorded in February 2020.
“A farm sale last week of 700 acres saw dry land farm sell between $3,750 and $5,575 an acre,” reported Jim Stanosheck, CEO of State Bank of Odell in Odell, Neb.
The March farm equipment-sales index rose to 63.5, its highest reading since February 2013 and up from 62.7 in February. After 86 straight months of readings below growth neutral, farm equipment bounced into growth territory for the last four months.
For the first time since September of last year, bankers reported an expansion in loan volumes. The March loan volume index increased to 61 from February’s 46.
This month, 83% of bankers said they support at least one interest rate hike in the next 12 months.
The confidence index, which reflects bank CEO expectations for the economy six months out, rose to a very healthy 76.7 and up from 64.
“Looming federal farm support payments, improving gain prices, and advancing exports have supported confidence offsetting negatives from pandemic ravaged retail and leisure and hospitality companies in the rural economy,” Goss says.
This RMI, which started in 2005, represents an early snapshot of the economy of rural agriculturally and energy-dependent portions of the nation. It focuses on 200 rural communities with an average population of 1,300.
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