From Creighton's Heider College of Business, Feb. 21:
February Survey Results at a Glance:
- Overall index remains above growth neutral for the 11th time in past 12 months.
- Bank
CEOs project a 6.1 percent decline in farm equipment sales over the
next year compared to a 6.9 percent reduction last February.
- Weak farm income has pushed almost two-thirds of banks to increase collateral requirements on farm loans.
- Almost one-third of banks have increased the farm loan rejection rate due to anemic farm income.
OMAHA, Neb. (Feb. 21, 2019) - The Creighton University Rural Mainstreet
Index for February fell, but remained above growth neutral, according
to the monthly survey of bank CEOs in rural areas of a 10-state region
dependent on agriculture and/or energy
Overall: The overall index sank to 50.2 from
January's 51.5. This was the 11th time in the past 12 months the index
has remained above growth neutral. The index ranges between 0 and 100
with 50.0 representing growth neutral.
"Our surveys over the last several months indicate
the Rural Mainstreet economy is expanding outside of agriculture.
However, the negative impacts of tariffs and low agriculture commodity
prices continue to weaken the farm sector," said Ernie Goss, PhD, Jack
A. MacAllister Chair in Regional Economics at Creighton University,
Heider College of Business.
Don Reynolds, chairman of Regional Missouri Bank in
Columbia, Missouri, reported that, "2018 was not a great year for
farmers in our area, but for the most part they have done better than we
anticipated. Cash flow projections for 2019 look very tight."
Farming and ranching: The farmland and
ranchland-price index for January increased to 42.2 from 37.9 in
January. This is the 63rd straight month the index has fallen below
growth neutral 50.0.
The January farm equipment-sales index slumped to
32.8 from January's 40.9. This marks the 66th consecutive month that the
reading has remained below growth neutral 50.0.
Bankers were asked to estimate the change in
agriculture equipment sales in their area for the next year. On average,
bankers expect another 6.1 percent decline in farm equipment sales over
the next year. This is an improvement from last year at this time when a
6.9 percent decline was expected.
Banking: Borrowing by farmers for February
was strong as the borrowing index soared to 71.3 from January's 55.8.
The checking-deposit index plummeted to 40.9 from January's 67.6, while
the index for certificates of deposit and other savings instruments
slipped to 47.0 from 47.1 in January.
James Brown, CEO of Hardin County Savings Bank in
Eldora, Iowa, reported, "(Weak farm income has produced) more
restructuring with ag loans to shore up working capital and reduce term
payments if possible while commodity prices remain low."
This month bankers were asked to identify their
bank's response to weak farm income. Almost two-thirds, or 62.6 percent,
indicated collateral requirements have been raised on farm loans. This
compares to 45.2 percent for February 2018.
Almost one-third, or 30.3 percent of bankers,
reported that a higher percentage of farm loan applications had been
rejected. This compares to 21.4 percent of banks in February 2018 that
reported they had rejected a higher percentage of farm loans.
Hiring: The employment gauge climbed to a
healthy; 60.6 from January's 55.7. Despite weak farm commodity prices
and farm income, Rural Mainstreet businesses continue to hire at an
improved rate. Over the past 12 months, the Rural Mainstreet economy
added jobs at a 1.1 percent pace compared to a higher 1.6 percent for
urban areas of the same 10 states.
Confidence: The confidence index, which
reflects bank CEO expectations for the economy six months out, climbed
to a still anemic 48.5 from January's 45.7, indicating a pessimistic
economic outlook among bankers.
"Tariffs, trade tensions, weak agriculture commodity
prices and anemic farm income negatively influenced the economic
outlook of bank CEOs," said Goss.
Home and retail sales: The home-sales index increased to 50.0 from 45.7 in January. Retail sales sank to 48.5 from January's 52.9....
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