Friday, December 21, 2018

Creighton University's Rural Mainstreet Index Shows Growth for December BUT...

"...More Than Half of Bankers Increased Farmer Collateral Requirement"

From Creighton, December 20:
December Survey Results at a Glance:
* Overall index moves above growth neutral for the 10th time in past 12 months. * Bankers project negative cash flow (losses) for more than one in six grain farmers. * More than half of bankers have boosted collateral requirements for farm loans due to low agricultural income. * One-fourth of bank CEOs have made no change in farm lending practices due to weak farm income. * Approximately one in 10 bank CEOs project 2019 farm loan defaults to rise by over 10 percent over 2018 levels. 
OMAHA, Neb. (Dec. 20, 2018) – The Creighton University Rural Mainstreet Index for December rose above growth neutral after slipping below the 50.0 threshold in January, 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 climbed to 54.2 from November’s 49.9, its first sub-growth neutral reading since January 2018. 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’s Heider College of Business.

Larry Winum, CEO of Glenwood State Bank in Glenwood, Iowa, said, “Glad to see Congress passed a bipartisan farm bill. (It) allows farmers and their community bankers to budget more accurately in the future.”

Farming and ranching: The farmland and ranchland-price index for December slipped to 35.7 from 35.9 in November. This is the 61st straight month the index has fallen below growth neutral 50.0.

The December farm equipment-sales index increased to 37.1 from November’s 30.6. This marks the 64th consecutive month that the reading has moved below growth neutral 50.0.

Banking: Borrowing by farmers advanced for December, as the borrowing index soared to a 72.2 from November’s loan-volume index of 60.6. The checking-deposit index inched forward to 55.6 from November’s 54.5, while the index for certificates of deposit and other savings instruments increased to 55.6 from 47.0 in November.

More than half of bankers, or 52.8 percent, have boosted collateral requirements for farm loans due to low agriculture income. One-fourth of bank CEOs have made no change in farm lending practices due to weak farm income.

Hiring: The employment gauge fell to a still healthy 57.1 from November’s 66.7. The Rural Mainstreet economy is now experiencing healthy job growth. Over the past 12 months, the Rural Mainstreet economy added jobs at a 1.4 percent pace compared to a higher 1.5 percent for urban areas of the same 10 states.

Confidence: The confidence index, which reflects bank CEO expectations for the economy six months out, slumped to 44.3 from November’s 47.0, indicating a pessimistic economic outlook among bankers.

“As in the last month several months, tariffs, trade tensions, and weak agriculture commodity prices negatively influenced the economic outlook of bank CEOs,” said Goss.

Home and retail sales: The home-sales index decreased to 47.2 from 51.6 in November. Retail sales climbed to 58.3 from November’s much weaker 45.5.

James Brown, CEO of Hardin County Savings Bank in Eldora, Iowa, reported, “Our Shopko is closing in February. This is a big loss for a town our size (2,700). Our store has done quite well, but not good enough for them.”

Each month, community bank presidents and CEOs in nonurban agriculturally and energy-dependent portions of a 10-state area are surveyed regarding current economic conditions in their communities and their projected economic outlooks six months down the road. Bankers from Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming are included. ...MUCH MORE