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Rural Mainstreet Economy Remains Weak for April
Minnesota Ag Connection - 04/29/2016

The Creighton University Rural Mainstreet Index for April fell unexpectedly from March's very weak reading, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

Overall: After increasing for two straight months, the Rural Mainstreet Index (RMI), which ranges between 0 and 100, sank to 38.2 from March's 40.2.

"This is the eighth straight month the overall index has moved below growth neutral. Even though agriculture and energy commodity prices have increased recently, they remain well below prices 12 months earlier," ," said Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University's Heider College of Business. "Compared to 12 months earlier, prices for farm products are down by 16 percent and energy products are 8 percent lower."

Farming and ranching: The farmland and ranchland price index for April rose to 26.7 from 20.2 in March. This is the 29th straight month the index has moved below growth neutral.

As in previous months, there is a great deal of variation across the region in the direction and magnitude of farmland prices, with prices growing in some portions of the region.

Bankers reported an average cash rent per acre for 2016 of $211 which is down by 7 percent from April of last year. But bankers indicated that there would be significant variation among farmers. Jeffrey Gerhart, chairman of Bank of Newman Grove, Newman Grove, Nebraska, said, "Cash flow is king and will continue to be the difference maker for producers. Those who manage it well will benefit, those who don't manage it well will not."

The April farm equipment-sales index climbed to a frail 11.1 from March's record low 6.7. "Weakness in farm income and low agriculture commodity prices continue to constrain the sale of agriculture equipment across the region. Reductions in farm prices have negatively affected the agriculture equipment dealers and manufacturers of farm equipment in the region," said Goss.

Banking: The April loan-volume index dipped to 71.8 from last month's 72.1. The checking-deposit index slipped to 47.8 from March's 53.4, while the index for certificates of deposit and other savings instruments advanced to 44.4 from 38.6 in March.

This month bankers were asked to identify the greatest challenge facing their banking operations over the next 5 years. More 43.5 percent reported rising regulatory costs was the biggest threat.

However, David Steffensmeier, president of the First National Bank in Beemer, Nebraska, said, "Low farm income and plummeting farmland values rank equally (as a threat)."

Hiring: Contrary to other economic indicators, Rural Mainstreet businesses maintained employment levels for the month with an index of 50.0, down from March's 60.3. "Even so, Rural Mainstreet employment is down by 0.7 percent from this time last year. This contrasts to an employment gain of approximately 1.7 percent for urban areas of the region," said Goss.

Confidence: The confidence index, which reflects expectations for the economy six months out, increased to 34.8 from 30.1 in March indicating a continuing pessimistic outlook among bankers. "Higher agriculture commodity prices pushed the index up slightly to April's sub-par reading," said Goss.

Home and retail sales: Home sales remain the bright spot of the Rural Mainstreet economy with an April index of 58.9 from 55.8 in March. The April retail-sales index rebounded to a weak 37.8 from 30.1 last month. "Home sales held up for the month, but rural retailers have yet to experience retail sales gains resulting from lower in fuel costs," said Goss.

Each month, community bank presidents and CEOs in nonurban agriculturally and energy-dependent portions of a 10-state 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. The survey is supported by a grant from Security State Bank in Ansley, Neb.

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 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. Goss and Bill McQuillan, former chairman of the Independent Community Banks of America, created the monthly economic survey in 2005.

Colorado: Colorado's Rural Mainstreet Index (RMI) sank to 43.6 from 51.9 in March. The farmland and ranchland-price index expanded to 66.3 from March's 58.8. Colorado's hiring index for April rose to 64.0 from March's 63.8.

Illinois: The April RMI for Illinois was unchanged from March's 37.8. The farmland-price index expanded to 22.2 from March's 16.0. The state's new-hiring index slipped to 47.9 from last month's 48.2.

Iowa: The April RMI for Iowa slumped to 41.2 from March's 50.2. Iowa's farmland-price index for April climbed to 45.6 from 39.1 in March. Iowa's new-hiring index for April dropped slightly to 56.4 from 56.6 in March.

Kansas: The Kansas RMI for April fell to 34.4 from March's 37.0. The state's farmland-price index for April slumped to 8.9 from March's 12.3. The new-hiring index for Kansas declined to 43.1 from 44.9 in March.

Minnesota: The April RMI for Minnesota tumbled to 38.0 from March's 44.7. Minnesota's farmland-price index climbed to 32.9 from 28.8 in March. The new-hiring index for the state declined to 51.8 from last month's 52.8. According to Pete Haddeland, CEO of the First National Bank in Mahnomen, "Land values seem to be holding steady."

Missouri: The April RMI for Missouri increased to 27.8 from 25.1 in March. The farmland-price index expanded to 28.7 from March's 15.8. Missouri's new-hiring index declined to 23.6 from March's 32.1.

Nebraska: The Nebraska RMI for April sank to 40.5 from 48.9 in March. The state's farmland-price index grew to 42.8 from March's 38.0. Nebraska's new-hiring index climbed to 57.3 from 56.2 in March.

North Dakota: The North Dakota RMI for April increased to a regional low of 14.9 from March's 14.7, also a regional low. The farmland-price index increased to 13.4 from 10.7 in March. North Dakota's new-hiring index expanded to 35.6 from March's 33.2.

South Dakota: The April RMI for South Dakota sank to 37.4 from 39.2 in March. The farmland-price index grew to 24.3 from 15.8 in March. South Dakota's new-hiring index plummeted to 37.8 from March's 50.0.


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