Thursday, February 17, 2011

Rural Mainstreet Economy Continues to Grow: Farmland Prices and Farm Equipment Sales Continue to Soar

February Survey Results at a Glance:
· Rural Mainstreet economy expands for February but pace of growth slows.
· Farmland prices continue to soar.
· Farm equipment sales expansion remains very strong.
· Strong farm cash receipts reduce loan volumes.
· Over 80 percent of bankers expect Dodd-Frank reform to have negative impact on community banks.

For Immediate Release: Feb. 17, 2011
OMAHA, Neb. – The February overall index for the Rural Mainstreet economy moved above growth neutral 50.0 for a fourth straight month adding to the expectations for sustained economic growth, according to this month’s survey of bank CEOs in a 10-state region.

Overall: The Rural Mainstreet Index (RMI), which ranges between 0 and 100, declined to a still healthy 55.3 from January’s 59.3. This compares to a much weaker reading of 36.6 in February 2010.

Creighton University economist Ernie Goss said, “An expanding global economy, a cheap dollar and alternative energy production are pushing the Rural Mainstreet economy into territory not experienced since the early 1970s.” Goss and Bill McQuillan, CEO of CNB Community Bank of Greeley, Neb., created the monthly economic survey in 2005.

Kathy Thuman, president of Farmers State Bank in Maywood, Neb., said “Farmers were profitable in 2010 due to all around high commodity prices, but I can't definitively say that will raise the entire economy of the area.” However, she argues that because of this expansion, farmers have “learned to save for a rainy day.”

Other bankers are likewise cautious such as Dale Bradley, CEO of Citizens State Bank in Miltonvale, Kan., who said he expects a market correction “due to many negatives still out in front of the economy.”

Farming: The farmland price index remained above growth neutral for the 13th straight month soaring to 75.9 from January’s 75.4. The farm equipment sales index was down though it remains healthy with a reading of 63.5, down from 74.6 in January. “Based on our survey of bankers, farmland prices continue to grow at an annualized rate of more than 15 percent and agriculture equipment sellers are experiencing surging sales across most of the region,” said Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton.

Cameron Mathis, president of Tilden Bank in Creighton, Neb., indicated he expects higher input prices this year would mean 2011 income growth would not be as good as 2010.

Banking: As a result of very healthy cash flows, farmers have reduced their borrowing. The loan volume index for February rose to 39.0 from January’s record low 33.9. For the 12th straight month, the other two banking indicators stood above growth neutral. The checking deposit index climbed to 67.8 from January’s 66.2 and December’s 66.7, while the index for certificates of deposit and other savings instruments slipped to 50.8 from 52.5 in January.

This month we asked bankers how the recently passed Dodd–Frank Wall Street Reform and Consumer Protection Act would likely affect community banks. Of bankers expressing an opinion, slightly less than 14 percent anticipate positive impacts while approximately 81 percent expect negative impacts for community banks with 5 percent expecting little or no impact. Of those expecting negative impacts, 44 percent expect “very negative” impacts.

However, some were more circumspect. Larry Winum, president of Glenwood State Bank in Glenwood, Iowa, said, “The key to how community banks will be impacted by the Dodd-Frank financial reform legislation will be determined by the final rules.”

Jobs: For a third straight month the Rural Mainstreet economy added jobs with a February index of 52.5, unchanged from January. “For this part of the country, rural areas are clearly outpacing the urban areas in terms of job growth. Even with recent job gains, the Rural Mainstreet economy has 115,100 fewer jobs today (2.4 percent) than before the recession,” said Goss.

Confidence: The economic confidence index, which reflects expectations for the economy six months out, surged to 70.9 from 63.4 in January. The confidence index has been trending higher over the past year and is well above last February’s reading of 52.8.

Home and retail sales: Despite the economic turnaround, home sales remained weak with a February reading of 44.0, down slightly from January’s 44.1. This is the eighth straight month the reading was below growth neutral 50.0. “Home sales have been on the decline since the tax credit for first-time home buyers ended last April,” said Goss.

Each month, community bank presidents and CEOs in nonurban, agriculturally and energy-dependent portions of the 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.

This survey represents an early snapshot of the economy of rural, agriculturally and energy-dependent portions of the nation. The Rural Mainstreet Index (RMI) is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. It gives the most current real-time analysis of the rural economy.

Colorado: For a second straight month, Colorado’s Rural Mainstreet Index (RMI) moved above growth neutral. The February reading rose to 51.8 from January’s 51.1. The February farmland and ranchland price index dipped to 69.1 from 71.3 in January. Colorado’s farm equipment sales index also slipped for the month with a February reading of 60.6 from January’s 70.5. The rate of job losses for Rural Mainstreet Colorado over the past 12 months was 0.7 percent.

Illinois: For a 10th straight month, Illinois’ RMI remained above growth neutral. The February index stood at regional high of 62.5, down from January’s 70.1. For a 13th straight month, farmland prices advanced above growth neutral with a February reading of 69.3, up from 67.5 in January. Farm equipment sales for February decreased to 67.5 from February’s 77.4. The rate of job gains for Rural Mainstreet Illinois over the past 12 months was 6.6 percent.

Iowa: The RMI for Iowa declined to 57.2 from January’s 61.8. The farmland price index advanced to 77.5 from 77.4 in January. The state’s farm equipment sales index slumped to 65.1 from 75.8 in January. The rate of job gains for Rural Mainstreet Iowa over the past 12 months was 1.9 percent.

Kansas: The RMI for Kansas was above growth neutral 50.0 for the month. However, the index decreased to 58.0 from January’s 63.2. The farmland price index rose to 78.2 from 77.3 in January. The February agricultural equipment sales index sank to 65.7 from 79.9 in January. The rate of job gains for Rural Mainstreet Kansas over the past 12 months was 1.6 percent.

Minnesota: The February RMI for Minnesota sank to 58.7 from 65.2 in January. Minnesota’s farmland price index grew to 78.8 from February’s 78.4. The agricultural equipment sales index stood at 66.3, down from January’s 77.6. The rate of job gains for Rural Mainstreet Minnesota over the past 12 months was 3.1 percent.

Missouri: The RMI for Missouri declined to 50.0 from 51.0 in January. The farmland price index for Missouri expanded to 71.5 from 71.2 in January. The February farm equipment sales index declined to 59.1 from 70.4 in January. The rate of job losses for Rural Mainstreet Missouri over the past 12 months was 4.5 percent.

Nebraska: The February RMI for Nebraska slipped to 57.2 from 62.4 in January. The farmland price index expanded to 77.6 from January’s 76.9. The farm equipment sales index decreased to 65.1 from February’s 76.1. The rate of job gains for Rural Mainstreet Nebraska over the past 12 months was 1.5 percent.

North Dakota: The North Dakota RMI for February slumped to 59.7 from 64.9 in January. The farmland price index expanded to 79.6 from January’s 78.2. Farm equipment sales for February stood at 67.2, down from 77.4 in January. The rate of job gains for Rural Mainstreet North Dakota over the past 12 months was 4.1 percent.

South Dakota: For a fourth straight month, the RMI for South Dakota was above growth neutral. The index for February declined to 56.6 from 60.9 in January. The farmland price index expanded to 77.0 from January’s 76.2. South Dakota's farm equipment sales index for February was 64.5, down from 75.4. The rate of job gains for Rural Mainstreet South Dakota over the past 12 months was 1.6 percent.

Wyoming: The Wyoming RMI for February dipped to 57.2 from January’s 62.2. The February farmland and ranchland price index slipped to 77.5 from 78.9 in January. The state’s agricultural equipment sales declined to 65.1 from 76.0 in January. The rate of job gains for Rural Mainstreet Wyoming over the past 12 months was 2 percent.


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For historical data and forecasts, visit our website at:
http://www2.creighton.edu/business/economicoutlook/

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