Falling grain prices pull at rural economic growth
Lower corn values spurred by increased production numbers are affecting rural economies as subtle growth continues, but retail business and hiring retract.
A survey of bank CEOs across a 10-state area shows the Rural Economic Index remained steady with the previous month at 54.3. The monthly index is only 4.3 points above growth neutral and 3.2 points below the index from a year ago.
Results show month-to-month increases in farmland prices and farm equipment sales, with the farmland-price index advancing for only the second time in the past 12 months. Farm equipment sales increased by 2.7 points to 47.3, showing losses are slowing, however this month’s index figure is much lower than the 60.4 recorded a year earlier.
The long-term outlook for farmland price growth is expected to slow and potentially decline over the next year.
“Despite the expansion in the index for the month, I expect farmland prices to grow at significantly slower rates for the first six months of 2014 than they did for the same period in 2013. In the November survey almost half, 49.1 percent, bankers indicated they expect farmland prices to decline by an average of 1 percent over the next 12 months,” said Ernie Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton University.
The November hiring index shows growth is slowing as the index fell 1.7 points from a month earlier, but remains 1.4 points above this time last year.
Results from the survey reveal bankers still expect the rural economy to decline, but at a slower rate than a month earlier. The confidence index increased from 44.7 to 48.3 in November, showing rural bank CEOs still expect a decline in the rural economy six months from now, but at a slower rate than previously thought.
“The lack of a farm bill, lower agriculture commodity prices and the EPA’s proposed changes in the mandated ethanol blending level weighed on bankers’ economic outlook,” said Goss.
The survey includes community bank presidents and CEOs in nonurban, agriculturally and energy-dependent portions of a 10-state area are surveyed regarding current economic conditions in their communities and their projected economic outlooks six months down the road. An index of 50 is neutral. Higher numbers show expansion, and lower numbers show decline. Bankers from Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming are included.
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