Ag remains strong as drought, employment concerns rise

Although the rural economy has continued its post-pandemic rebound, rural employment in the country’s ag- and energy-dependent central states has yet to fully recover.

While the Rural Mainstreet Index stayed well above growth-neutral (50.0), July saw slowing growth. It marked the eighth straight month above growth neutral, but fell to 65.6 from June’s 70.0 and May’s record-high 78.8.

Approximately, just under a third — 31.3 percent — of bank CEOs reported that their local economy expanded between June and July. The July loan volume index declined to 53.0 from June’s 54.9, and the checking-deposit index fell to a still-solid 67.7 from June’s 70.0. The index for certificates of deposit and other savings instruments, slumped to 32.3 from 35.0.

Ernie Goss

“Solid, but somewhat weaker, grain prices, along with the Federal Reserve’s record-low interest rates, and growing exports have underpinned the Rural Mainstreet Economy. Even so, current rural employment remains below pre-pandemic levels,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

The new hiring index decreased to 67.6 from 71.7 in June. Despite recent solid job gains for the region, data from the Bureau of Labor Statistics indicate that nonfarm employment for the Rural Mainstreet economy is down by approximately 55,000 (non-seasonally adjusted), or 1.3 percent, compared to pre-COVID-19 levels. 

Farmland prices remained strong, with that index down only slightly to 71.0 from last month’s 75.9. This is the first time in almost a decade that the Creighton University survey has recorded 10 straight months of farmland prices above growth neutral. On average, bank CEOs estimated farmland price growth for the previous 12 months at 5.8 percent, but projected growth at only 2.4 percent for the next 12 months.

Just under half of bankers reported damaging drought conditions for farmers in their area, but results varied widely across the 10-state RMI footprint. Steve Simon, CEO of the $315 million South Story Bank and Trust in Huxley, Iowa, reported: “Although still under drought conditions, central Iowa has received some timely, much needed rain.”

The July farm equipment-sales index declined to 67.2 from 71.6 in June. Readings over the last several months represent the strongest consistent growth since 2012.

The RMI surveys community bank presidents and CEOs each month in nonurban agriculturally and energy-dependent areas regarding current and projected economic conditions in their communities. Bankers come from about 200 small towns with an average population of 1,300 in 10 states: Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming.

Goss and Bill McQuillan, former chair of the Independent Community Banks of America, created the monthly economic survey in 2005.

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