Midwest rural economy improves, regional issues cause for concern
Slow growth was observed in Midwest rural economies, but political uncertainty, low grain prices and cattle losses resulting from the unexpected winter storm prevented substantial improvement.
The monthly survey of community bank presidents and CEOs in the 10-state area shows growth for the Rural Mainstreet economy remains positive. The October Rural Mainstreet Index (RMI) improved 1.9 percent to 54.3%, signifying slight economic growth.
Improvements were noted for hiring, up 2.9 to 56.1 on the index and an optimistic reaction to the government shutdown. Of the bankers and CEOs surveyed, only 25.9 percent saw a negative impact from the furlough while 74.1 percent saw little or no impact.
Many categories influencing the rural economy are declining, however many remain above 50, pointing to continued growth.
Lower grain prices are affecting land values and farm equipment sales. The farmland-price index has fallen lower in all but one of the past 11 months. The index, which fell 3.1 lower on the index to 50.9, is weakened by lower agriculture commodity prices and poor weather conditions.
Farmland cash rent prices are also forecasted to increase over the next year, but at a much lower increase compared to six months earlier. Farm equipment sales fell from 48.3 to 44.6 on the index, showing continued decline.
Cattle producers in South Dakota and Nebraska continue to tally losses from the early October blizzard. While the House and Senate consider a new farm bill that could possibly cover those losses with a retroactive Livestock Indemnity Program, producer losses are expected to spill into local economies in the near-term.
Ernie Goss, economist at Creighton University, expects economic growth to continue in rural communities, but also recognizes the significant decline of some agriculture commodity prices. Goss expects the rural economy to be slower in the months ahead.
Looking forward, the survey forecasts a potential slump with the six-month outlook falling 1.4 to 44.7.
The survey was conducted during the government shutdown. 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.