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Minnesota Ag News Headlines
Rural Mainstreet Starts Year Off Strong
Minnesota Ag Connection - 01/21/2022

The Creighton University Rural Mainstreet Index (RMI) declined in January, though it remained above growth neutral the for14th straight month, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

Overall: The region's overall reading for January fell to 61.1 from December's 66.7. The index ranges between 0 and 100 with a reading of 50.0 representing growth neutral.

"Solid grain prices, the Federal Reserve's record-low short-term interest rates, and growing agricultural exports have underpinned the Rural Mainstreet Economy," said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University's Heider College of Business.

This month, bankers were asked to identify the greatest 2022 risk for farmers in their area. Bankers overwhelmingly named rising farm input prices, such as fertilizer, as the top farm threat.

Bankers ranked disruptions of the delivery of farm inputs and rising interest rates as the second and third greatest 2022 threats to farm operations.

"Inflation is a serious problem here. Gasoline prices have nearly doubled since November 2020," said Jim Eckert, president of the Anchor State Bank in Anchor, Illinois. "Food prices are up well above what's claimed by the government. Poor fiscal policy in D.C. is sinking all ships!"

Jim Brown, CEO of Hardin County Savings Bank in Eldora, Iowa, reported that, "Increased input costs have raised our average farmer break even points, but current commodity prices still produce moderate gains in all areas of financial statements."

Farming and ranching: The region's farmland price index decreased to a very strong 88.5 from December's record high of 90.0. January's reading represented the 16th straight month the index has moved above growth neutral.

The January farm equipment-sales index slipped to a very healthy 72.4 from 74.1 in December. This is the 14th straight month that the index has advanced above growth neutral. Readings over the past several months are the strongest string of monthly readings recorded since Spring 2011.

Banking: The January loan volume index plummeted to 28.8 from December's 61.7. While January farm loans are normally low, this reading was below normal January readings. The checking-deposit index climbed to 76.9 from December's 68.3, while the index for certificates of deposit, and other savings instruments increased to a weak 42.3 from 26.7 in December.

On average, bank CEOs expect the Federal Reserve to raise short-term interest rates by 0.70% (70 basis points) in 2022. Approximately 18.5% of bankers expect four or more one-quarter percentage point rate hikes in 2022.

Brown said "Our loan reviews show an increase in working capital, net worth and lower leverage in almost every case."

Hiring: The new hiring index fell to a still healthy 61.1 from 72.4 in December. Labor shortages continue to be a significant issue constraining growth for Rural Mainstreet businesses.

As a result of recent strong Rural Mainstreet job gains, U.S. Bureau of Labor Statistics data indicate that over the last 12 months, the region has experienced a healthy 4.0% gain in nonfarm employment (non-seasonally adjusted).

Confidence: After declining for five consecutive months, the confidence index, which reflects bank CEO expectations for the economy six months out, rose for a second straight month to 61.1 from 55.2 in December.

Home and retail sales: The home-sales index sank to a still strong 65.4 from December's 72.4. The retail-sales index for January fell to a solid 57.4 from 68.3 in December. "Healthy farm commodity prices and federal stimulus spending are having positive impacts on Rural Mainstreet retail sales and home sales," said Goss.

The 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 and launched in January 2006.

The January RMI for Minnesota fell to 81.2 from 82.3 in December. Minnesota's farmland-price index dipped to 95.0 from December's 95.5. The new-hiring index for January declined to 69.7 from 75.8 in December. U.S. Bureau of Labor Statistics data indicate that Minnesota's Rural Mainstreet economy has experienced a very strong 6.9% gain in its nonfarm employment (non-seasonally adjusted).

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