Sunday, February 18, 2007

Ethanol Continues to Drive Mainstreet Economy

February Survey Results At A Glance:
* Economies of the rural areas of the nine-state region remain strong.
* Farm land price index rose to record high.
* Almost 32 percent of bankers support greater federal government financial support for ethanol.
* Confidence index advanced to a record high.

The Mainstreet economic index from a February survey in non-urban, agriculturally dependent portions of a nine-state area declined slightly from January, but was up significantly from this time last year. Each month, community bank presidents and chief executive officers (CEOs) 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, Missouri, Nebraska, North Dakota, South Dakota and Wyoming are included.

Bank presidents and CEOs in the region reported very strong economic conditions for February with the overall index standing at a very healthy 60.0, down slightly from January’s 61.2, but up significantly from 48.1 in February of 2006. Much of this growth can be traced to expanding ethanol production and strong farm income. Bankers in all of the survey states, except Kansas, reported job gains for February. The rate of new hiring in the region, while down from January’s 61.2, stood at a solid 56.4. As in past months, bankers in non-urban areas, especially those in Wyoming, reported that labor shortages were restraining growth in their local areas. At this time, the rate of job creation in the rural and non-urban areas of the region is fully twice that of the urban and metropolitan areas. Absent a large and unanticipated rate hike by the Federal Reserve, I expect job growth on Mainstreet to continue at a very healthy pace over the next three to six months. The construction and operation of ethanol plants is having a noted and positive impact on farmland prices. The Mainstreet farmland price index soared to 75.0, its highest level since initiation of the survey in 2005 and up from January’s 70.2 and February 2006’s 72.0. “Land recently sold in Cerro Gordo County for over $5,400 per acre. This is a record high for farmland,” said Marti Rodamaker, CEO of First Citizens National Bank in Mason City, Iowa.

Ernie Goss

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