From Creighton University's Heider College of Business, July 20:
July 2023 Survey Results at a Glance:
• July’s overall reading, the Rural Mainstreet Index (RMI), rose above growth neutral for a fourth straight month.
• Farmland prices expanded for the 34th straight month.
• On average, non-farm investors secured approximately 17.1% of farmland sales in the region, up from 9.1% reported by bankers in April 2022.
• More than nine of ten, or 92.5%, indicated that the Fed should cease raising rates.
• More than three-fourths of bankers expect that Secretary Yellen’s policy encouraging bank mergers and acquisition would damage community banks and farmers.
After declining below growth neutral in March, the overall Rural Mainstreet Index for July expanded above the threshold for a fourth straight month, according to the July monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.
Overall: The region’s overall reading in July slipped to 55.6 from June’s 56.9. The index ranges between 0 and 100, with a reading of 50.0 representing growth neutral.
“After negative growth during the first quarter of this year, the Rural Mainstreet economy experienced positive but slow economic growth for the second quarter and has now started the third quarter on a healthy note,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.
Farming and ranching: The region’s farmland price index rose to 64.6 from 59.3 in June and 56.3 in May. This was the 34th straight month that the index has advanced above 50.0.
Bankers reported that, on average, non-farm investors secured approximately 17.1% of farmland sales in their area over the past six months. This is almost double the 9.1% reported by bankers in April 2022 when the same question was asked.
Farm equipment sales: The farm equipment-sales index for July stood at a tepid 50.0, which was up from 48.3 in June. “Higher borrowing costs have begun to negatively impact purchases of farm equipment,” said Goss.
Banking: The July loan volume index declined to a still strong 75.9 from June’s 79.2. The checking deposit index sank to 32.7 from 37.5 in June, and the index for certificates of deposit and other savings instruments decreased to a vigorous 71.2 from 76.8 for June.
Bank CEOs were asked to comment on the Federal Reserve’s current short-term interest rate policy. More than nine of ten, or 92.5%, indicated that the Fed should cease raising rates. Only 7.5% indicated that the Fed should continue to raise short-term interest rates.
“Higher short-term interest rates produced by Federal Reserve’s rate hikes over the past year have posed a significant threat to community banks by expanding the costs of customer deposits while the rates on bank loans have risen little over the same time period,” said Goss.
Despite the loss of 40-45% of community banks during the last financial crisis in 2008-09, Treasury Secretary Janet Yellen has backed policies that encourage more mergers and acquisitions in the banking sector. More than three-fourths of bankers expect that such a policy would be damaging to community banks and to the farm economy served by the banks....
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