Rural Mainstreet Economy slumps to lowest level in three years

For a third straight month, the overall Rural Mainstreet Index (RMI) sank below growth neutral, according to the November 2023 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 November fell to 40.4 from 44.4 in October and 49.5 in September. The index ranges between 0 and 100, with a reading of 50.0 representing growth neutral.

“This is the weakest recorded reading in more than three years, or since June 2020, shortly after the beginning of the pandemic, and points to weaker farm and non-farm economies,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

Farming and ranching land prices: The region’s farmland price index climbed to 66.7 from October’s 55.6. “Creighton’s survey continues to point to solid, but slowing, growth in farmland prices as farm commodity prices weakened,” said Goss.

Farm equipment sales: The farm equipment-sales index for November increased slightly to a weak 49.5 from October’s 48.0. “This is the fifth time the past 6 months that the index has fallen below growth neutral. Higher borrowing costs are having a negative impact on the purchases of farm equipment,” said Goss.

“For a third consecutive month, several bankers voiced concerns over economic losses of pork producers in their area,” said Goss.

Matthew Brown, Vice-President of Ag & Commercial Banking with CBI Bank and Trust in Washington, Iowa stated that, “We are losing a hog integrator that produced 400,000 head of hogs annually. They were shut down by Farm Credit with $38.8 million in debt. Currently preparing for liquidation.”

According to the International Trade Administration, the export of agriculture products from the region declined from $9.8 billion for the first nine months of 2022 to $8.6 billion for the same period in 2023 for a 12.7% slump.

Jim Eckert, CEO of Anchor State Bank in Anchor, Ill. said that, “Harvest is complete. Corn yields are about the same as 2022 and soybeans yields are slightly lower. All-in-all, the crop was much better than expected, given the VERY dry July this year.”

Banking: The November loan volume index fell to a solid 57.9 from October’s 77.7, and from a reading of 65.8 in November 2022. The checking deposit index soared to 56.0 from October’s very weak 26.9.  This is the first time since January 2023 that the index has advanced above growth neutral. The index for certificates of deposits and other savings instruments declined to a still solid 58.0 from 59.6 in October.

“Higher short-term interest rates produced by Federal Reserve rate hikes over the past year continue to pose a significant threat to community banks by expanding the costs of customer deposits while the rates on bank loans have not risen as significantly over the same time period,” said Goss.

Hiring: The new hiring index for November slipped to 49.1 from October’s 49.2. “Approximately 88.5% of bankers reported that job openings in their local economy exceeded the available workers,” said Goss.

Confidence: Higher interest rates, deposit outflows and a slowing farm economy over the past several months continued to constrain the business confidence index to a record low 21.2 from 24.1 in October. “This month’s reading is the most negative outlook recorded since Creighton began the monthly survey in January 2006,” said Goss.

“Approximately 57.7% of bankers expect economic conditions to worsen in the next six months,” said Goss.

Home and retail sales: Both home sales and retail sales sank below growth neutral for November. The November home-sales index dropped to 32.0 from 40.4 in October. “Higher mortgage rates are sinking home sales in rural areas,” said Goss.

The retail-sales index for November slumped to 44.2 from October’s 46.3. “High consumer debt and elevated interest rates are cutting into retail sales in rural and urban areas of the region,” 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 is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. The index provides 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 and launched it in January 2006.

Below are the state reports:

South Dakota: The November RMI for South Dakota improved to 44.2 from 42.2 in October. The state’s farmland-price index climbed to 65.4 from 53.7 in October. South Dakota’s November new hiring index increased to 49.2 from 46.2 in October. According to the International Trade Administration, the export of agriculture products from South Dakota expanded from $100.7 million for the first nine months of 2022 to $105.6 million for the same period in 2023 for a 4.9% growth.

Colorado: Colorado’s RMI for November declined to a solid 58.9 from October’s very strong 75.4. The farmland- and ranchland-price index for November rose to 73.2 from October’s 63.1 The state’s new hiring index increased to 58.8 from 57.8 in October. According to the International Trade Administration, the export of agriculture products from Colorado expanded from $97.7 million for the first nine months of 2022 to $128.4 million for the same period in 2023 for a 34.16% growth.

Illinois: The November RMI for Illinois declined to 44.8 from October’s 49.5. The farmland-price index climbed to 65.8 from 55.8 in October. The state’s new-hiring index fell to 49.4 from October’s 50.1. According to the International Trade Administration, the export of agriculture products from Illinois expanded from $2.4 billion for the first nine months of 2022 to $3.3 billion for the same period in 2023 for a 34.23% growth.

Iowa: Iowa’s November RMI slumped to 32.4 from 43.5 in October. Iowa’s farmland-price index for November soared to 62.0 from October’s 45.9. Iowa’s new-hiring index for November increased to 45.1 from 44.2 in October. According to the International Trade Administration, the export of agriculture products from Iowa declined from $1.7 billion for the first nine months of 2022 to $1.2 billion for the same period in 2023 for a 29.8% slump.

Kansas: The Kansas RMI for November fell to 39.6 from October’s 45.0. The state’s farmland-price index advanced to 64.1 from 54.5 in October. The new-hiring index for Kansas sank to 47.6 from October’s 50.1. According to the International Trade Administration, the export of agriculture products from Kansas declined from $1.8 billion for the first nine months of 2022 to $0.9 billion for the same period in 2023 for a 48.9% slump.

Minnesota: The November RMI for Minnesota sank to 33.8 from October’s 37.9. Minnesota’s farmland-price index climbed to 62.4 from 52.5 in October. The new-hiring index for November increased to 45.6 from October’s 45.1. According to the International Trade Administration, the export of agriculture products from Minnesota declined from $1.2 billion for the first nine months of 2022 to $0.9 billion for the same period in 2023 for a 21.4% slump.

Missouri: The state’s November RMI declined to a regional low 29.8 from 36.5 October. The farmland-price index rocketed to 61.3 from 52.1 in October. The state’s new hiring gauge increased slightly to 44.2 from 44.1 in October. According to the International Trade Administration, the export of agriculture products from Missouri declined from $913.6 million for the first nine months of 2022 to $885.4 million for the same period in 2023 for a 3.1% slump.

Nebraska: The Nebraska RMI for November fell to 39.7 from 44.3 in October. The state’s farmland-price index for November climbed to 64.1 from 54.3 in October. Nebraska’s November new-hiring index slumped to 47.6 from October’s 49.8. According to the International Trade Administration, the export of agriculture products from Nebraska declined from $981.4 million for the first nine months of 2022 to $470.0 million for the same period in 2023 for a 52.1% slump.

North Dakota: North Dakota’s RMI for November decreased to 53.6 from 58.5 in October. The state’s farmland-price index rose to 68.9 from 58.4 in October. The state’s new-hiring index declined to 53.6 from October’s 53.9. According to the International Trade Administration, the export of agriculture products from North Dakota expanded from $687.0 million for the first nine months of 2022 to $715.9 million for the same period in 2023 for a 4.2% growth.

Wyoming: The November RMI for Wyoming decreased to 47.8 from October’s 52.5. The November farmland- and ranchland-price index grew to 66.4 from 56.7 in October. Wyoming’s new-hiring index dipped to 50.5 from October’s 51.3. According to the International Trade Administration, the export of agriculture products from Wyoming declined from $6.6 million for the first nine months of 2022 to $4.0 million for the same period in 2023 for a 39.3% slump.

Tables 1 and 2 summarize the survey findings. Next month’s survey results will be released on the third Thursday of the month, December 21, 2023.