Creighton University's "Rural Mainstreet Index Climbs for June: One-Third of Bankers Report Ethanol Plant Shutdowns"

From Creighton's Heider College of Business, June 18:

June Survey Results at a Glance:

• Overall index advanced to a weak level. More than three fourths of bank CEOs reported an economic downturn in their local area.
• Almost one-third of bankers with local ethanol plants reported current production shutdowns, either permanent or temporary.
• Approximately 33.5% of bankers expect low commodity prices to be the greatest economic challenge over the next 12 months for their Rural Mainstreet bank.
• More than one-fourth, or 27.3%, of bankers indicated that rising loan defaults represented the biggest challenge for their banks for the next 12 months.

OMAHA, Neb. (June 18, 2020) - The Creighton University Rural Mainstreet Index (RMI) increased to a weak level from May’s feeble reading. According to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy, June’s reading represented the third straight month with recessionary economic conditions. 

Overall: The overall index for June climbed to 37.9, well below growth neutral, but up from May’s 12.5 and April’s record low 12.1. The index ranges between 0 and 100 with a reading of 50.0 representing growth neutral. 

“Even with a slight recent rebound in prices, farm commodity prices are down by 7.3% over the last 12 months. As a result, and despite the initiation of $16 billion in USDA farm support payments, only 3% of bankers reported positive economic growth,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University's Heider College of Business. 

This month bank CEOs were asked the current operation status of ethanol plants in their area. Almost one-third of bankers with local ethanol plants reported current production shutdowns, either permanent or temporary. 

Farming and ranching: Farmland prices continue to slide, but at a slower pace, with a June reading of 46.8 up from May’s 39.7. This is the 78th time in the past 79 months the index has been below growth neutral.

The June farm equipment-sales index increased to a weak 32.8 from 21.9 in May. This marks the 81st straight month the reading has remained below growth neutral 50.0. 

Banking: Borrowing by farmers expanded for June, but at a slower rate than in May. The borrowing index fell to 63.6 from May’s 72.2. The checking-deposit index declined to 77.3 from May’s 86.1, while the index for certificates of deposit and other savings instruments increased to 51.5 from 48.6 in May....

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Creighton Professor Ernie Goss, adjusted himself in his comfy endowed chair to respond to Chief Executive Magazine:

The Shape Of Recovery: V, U, W or L?

Six top economists make their best cases for the shape of things to come.

...Goss, whose research focus is labor economics, econometrics and macroeconomics, initially predicted a V-shaped recovery, changing his forecast in early May to a U-shaped one with a longer horizontal.

“I’m still hopeful for a V-shaped rebound,” he says. “People are hunkered down now in their homes, and when many of them receive the check from the stimulus legislation, they’ll eventually spend the money, kicking the economy back into gear. I just think this will take longer than I previously considered. I now see us bumping along at the bottom more like a U-shape.”

The reason, he says, is....

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