The Creighton University Rural Mainstreet Index is below growth neutral for the 20th straight month, and the reasons why are familiar.
“Agricultural commodity prices are still weak,” said economist Ernie Goss. “Farm income will be down for 2017 for the fourth year in a row. It’s not bleak. I don’t want to paint that sort of a picture, but there’s a real difference between the rural areas and urban areas.”
Farmland prices continue to struggle, as the farmland price index is down for the 41st straight month.
“What the bank CEOs expect for 2017 is a drop of another 7 percent in agricultural land prices,” said Goss. “That’s an average across ten states. That will vary significantly, depending on the area of the region and the area of the state.”
Given the loan-volume among rural bankers soaring to a record 81.6 from last month’s 51.4 combined with the lack of underlying price value, there is a chance that financial institutions in rural areas could be overleveraged.
“Yes, there is a possibility,” said Goss. “It will all depend on whether agricultural commodity prices rebound and look better. Right now, they’re still not where we want them to be.”
Because of those low commodity prices, the confidence index for the bankers slipped to 45.6 from 47.5 in March.
Fifty in any individual measure or in the entire metric is below growth neutral.