Community Bankers of Iowa Monthly Banker Update April 2014 | Page 18

Creighton

Main Street
Economic Survey

U N I V E R S I T Y

Rural Mainstreet Economy for March:

Still Weak with Declines in Farmland Prices
March Survey Results at a Glance:
•
•
•
•

Rural Mainstreet Index up slightly for the month indicating
only slim growth.
Farmland price index sinks to lowest level since March
2009.
Agriculture equipment sales decline to lowest level since
May 2009.
Cash rents for farmland expected to increase by less than
1 percent over next year.

For Immediate Release: Mar. 20, 2014
OMAHA, Neb. – After moving below growth neutral for February,
the Rural Mainstreet economy rose slightly above 50.0,
according to the March survey of bank CEOs in a 10-state area.
Overall: The Rural Mainstreet Index (RMI), which ranges
between 0 and 100, with 50.0 representing growth neutral,
increased to 50.1 from 48.4 in February.
Scott Tweksbury, president of Heartland State Bank in Edgeley,
N. D. reported, “Our market had yield reductions due to drought
in 2013 and that has had some bearing on local conditions.
Livestock producers, cow-calf in particular, are generally
enjoying record profits offsetting reductions in crop farming
income.”
“The overall index for the Rural Mainstreet Economy indicates
that the areas of the nation highly dependent on agriculture
and energy experiencing slow, to no growth over recent
months. Slight upturns in agriculture commodity prices over
the past several months have yet to boost the Rural Mainstreet
Economy. We will need to see additional increases in farm
commodity prices to push the agriculture based economy back
into healthy growth territory such as was experienced in 2012
and early 2013,” said Ernie Goss, the Jack A. MacAllister Chair
in Regional Economics at Creighton University Heider College
of Business.
Farming and Ranching: The farmland and ranchland-price
index for March sank to 40.9, its lowest level since March 2009,
and down from February’s very weak 41.7. “This is the fourth
straight month that the farmland and ranchland-price index has
moved below growth neutral,” said Goss.
Farm equipment sales remained below growth neutral for the
18

CBI BANKER UPDATE | APRIL 2014

Ernie Goss

ninth straight month. The March index sank to a weak 29.3,
its lowest reading since May of 2009, and down from 30.9 last
month. “Agriculture equipment and implement dealers in the
agriculture based areas of the region are experiencing very
weak sales to farmers even as farm equipment manufacturers
are experiencing positive growth due to healthy sales abroad,”
said Goss.
This month bankers were asked the current value of annual
cash rents for farmland in their area and how much they
expected values to change over the next 12 months. A regional
average of $258 per acre was recorded with growth of only 0.6
percent expected over the next 12 months. More than one-third,
or 35.8 percent, expect cash rents to decline over the course of
the next year. “Last March when we asked this same question,
bankers anticipated that cash rents would rise by 9.3 percent
over the next year. This is a significant deterioration in the
outlook for cash rents from this time last year,” said Goss.
Tweksbury said, “We are seeing renters requesting reductions
from landlords but few landlords agreeing. I think little will
change for 2014 but if commodity prices remain unchanged then
some reductions likely for 2015.”
“With the Federal Reserve continuing to withdraw their
economic stimulus, I expect rising interest rates to put even
more downward pressures on farmland prices and cash rents,”
said Goss.
Banking: The loan-volume index advanced to a robust 65.5
from February’s 50.0. The checking-deposit index expanded
to 65.5 from February’s 61.7, while the index for certificates of
deposit and other savings instruments was unchanged from
February’s 42.5.
This month bankers were also asked to report factors restraining
loan demand for their banks. More than one-third, or 34.7
percent, indicated that loan demand was normal and with
lending advancing as usual. However, 44.9 percent reported
that lack of demand from borrowers was limiting lending. More
than 10 percent detailed lending pullbacks due to poor credit
quality of applicants. Additionally 10.2 percent of bankers
reported that banking regulations were restricting bank loans.
Bryan Grove, CEO of American State Bank in Grygla, Minn.,
(Rural Mainstreet continued on next page)