Rural Mainstreet Economy Expansion Quickens: Farmland Prices and Farm Equipment Sales Continue to Soar

March Survey Results at a Glance:
· Pace of Rural Mainstreet economic expansion quickens for March.
· Home sales increase for first time since end of federal tax credit.
· Farm equipment sales expansion remains very strong.
· Strong farm cash receipts reduce loan volumes.
· Almost 50 percent of bankers think that the problem of “too big to fail” has grown over the past three years.

The March overall index for the Rural Mainstreet economy moved above growth neutral 50.0 for a fifth straight month indicating that the rural agriculturally dependent areas of the region continue to expand at a solid pace, 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, advanced to a healthy 56.7 from February’s 55.3. This compares to a much weaker reading of 47.4 in March 2010.

Creighton University economist Ernie Goss said, “Expanding global and domestic economic growth is pushing the Rural Mainstreet economy into solid growth territory,” Goss and Bill McQuillan, CEO of CNB Community Bank of Greeley, Neb., created the monthly economic survey in 2005.

Farming: The farmland price index remained above growth neutral for the 14th straight month slipping slightly to a strong 75.0 from 75.9 in February. The farm equipment sales index ballooned to 75.9 from 63.5 in February. “Farm implement producers and dealers are experiencing a banner year as farmers spend their higher income,” said Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton.

According to Michael Johnson, CEO of the Swedish American Bank in Courtland, Kan., “We had an 80 acre tract that sold two years ago for $3,000 an acre. Same land resold last week for $5,000 per acre.”

But some concerns were raised. Cameron Mathis head of the Tilden Bank in Creighton, Neb., is concerned that escalating fuel prices could boost farm input prices to levels significantly cutting into farm income.

Banking: The loan volume index for March rose to 47.1 from February’s 39.0. The checking deposit index increased to 68.7 from 67.8 in February, while the index for certificates of deposit and other savings instruments slipped to 45.5 from 50.8 in February.

This month bankers were asked how the recently passed Dodd–Frank Wall Street Reform and Consumer Protection Act would likely affect community banks. Of the bankers expressing an opinion, 96 percent expect to charge customers additional fees to cover their higher transaction costs associated with the portion of the bill which caps the swipe fees charged for debit card transactions. In fact, 99 percent of bankers advocate modification or further analysis of the portion of the bill.

This month bankers were also asked how government action since the financial meltdown in 2008 has affected “too big to fail” (TBTF). Only 4percent of the bankers think that TBTF is a smaller problem today than in 2008. Almost half, or 48 percent, think TBTF is a bigger problem today than three years ago.

According to Larry Winum, president of Glenwood State Bank in Glenwood, Iowa, “The only way to truly eliminate TBTF is to downsize all bank and non-bank financial institutions to a level that they will no longer cause a "systemic risk" to the entire economy."

Ken Henstorf, president of the First National Bank in Shenandoah, Iowa indicated that only “lip service” had been paid to TBTF. Henstorf said that TBTF banks are bigger today than in 2008.

Jobs: For a fourth straight month the Rural Mainstreet economy added jobs with a March index of 56.2 from 52.5 in February. “Rural areas are clearly outpacing the urban areas in terms of job growth. Even with recent job gains, the Rural Mainstreet economy has 206,000 fewer jobs today (4.4 percent) than before the recession,” said Goss.

Confidence: The economic confidence index, which reflects expectations for the economy six months out, was down, but a still strong 65.2 from 70.9 in February. The confidence index has been trending higher over the past year and is well above last March’s reading of 54.3.

Home and retail sales: For the first time since June of last year, the home sales index climbed above growth neutral. The March index increased to 52.3 from 44.0 in February. “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 third straight month, Colorado’s Rural Mainstreet Index (RMI) moved above growth neutral. The March reading rose to 55.5 from February’s 51.8. The March farmland and ranchland price index was unchanged from February’s 69.1. Colorado’s farm equipment sales index soared to 74.9 from 60.6 in February. The rate of job gains for Rural Mainstreet Colorado over the past 12 months was 0.4 percent.

Illinois: For a 11th straight month, Illinois’ RMI remained above growth neutral. The March index stood at 56.6, down from 62.5 in February. For a 14th straight month, farmland prices advanced above growth neutral with a March reading of 75.5, up from February’s 69.3. Farm equipment sales for March climbed to 75.8 from 67.5 in February. Jim Ashworth, president of Carlinville National Bank in Carlinville, said that, “While our local economy in general remains mired, we enter an interesting planting season as land prices continue to rise as higher cash rents follow grain prices.” The rate of job gains for Rural Mainstreet Illinois over the past 12 months was 0.5 percent.

Iowa: The RMI for Iowa inched upward to 57.3 from February’s 57.2. The farmland price index slipped to 75.5 from 77.5 in February. The state’s farm equipment sales index jumped to 76.4 from February’s 65.1. The rate of job gains for Rural Mainstreet Iowa over the past 12 months was 1.6 percent.

Kansas: The RMI for Kansas was above growth neutral 50.0 for the month. However, the index dipped to a still healthy 55.9 from 58.0 in February. The farmland price index declined to 74.4 from February’s 78.2. The March agricultural equipment sales index rose to 75.3 from February’s 65.7. Dale Bradley, CEO of The Citizens State Bank in Miltonvale, said, “A very fragile economy.” He is concerned about upcoming mortgage failures, higher fuel prices, along with state governments in the red. He also reported that much of the wheat in Kansas is in fair to poor condition. The rate of job losses for Rural Mainstreet Kansas over the past 12 months was 0.5 percent.

Minnesota: The March RMI for Minnesota dipped to 57.2 from 58.7 in February. Minnesota’s farmland price index declined to a still robust 75.4 from February’s 78.8. The agricultural equipment sales index stood at 76.3, up significantly from 66.3 in February. The rate of job gains for Rural Mainstreet Minnesota over the past 12 months was 1.5 percent.

Missouri: The RMI for Missouri rose to a regional low of 51.5 from February’s 50.0. The farmland price index for Missouri expanded to 76.6 from 71.5 in February. The March farm equipment sales index jumped to 71.5 from 59.1 in February. The rate of job losses for Rural Mainstreet Missouri over the past 12 months was 2.9 percent.

Nebraska: The March RMI for Nebraska advanced to 58.7 from February’s 57.2. The farmland price index slipped to 76.6 from 77.6 in February. 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 3.2 percent.

North Dakota: The North Dakota RMI for March climbed to a regional high of 66.3 from 59.7 in February. The farmland price index expanded to 83.0 from 79.6 in February. Farm equipment sales for March rocketed to 83.9 from 67.2 in February. The rate of job gains for Rural Mainstreet North Dakota over the past 12 months was 10.2 percent.

South Dakota: For a fifth straight month, the RMI for South Dakota was above growth neutral. The index for March climbed to 57.7 from February’s 56.6. The farmland price index dipped to 75.8 from 77.0 in February. South Dakota's farm equipment sales index for March was 76.7, up from 64.5 in February. The rate of job gains for Rural Mainstreet South Dakota over the past 12 months was 1.2 percent.

Wyoming: The Wyoming RMI for March was unchanged from February’s 57.2. The March farmland and ranchland price index slipped to 75.5 from 77.5 in February. The state’s agricultural equipment sales soared to 76.4 from February’s 65.1. The rate of job gains for Rural Mainstreet Wyoming over the past 12 months was 1.5 percent.