For five straight months, the Rural Mainstreet Index (RMI) has shown above neutral growth for the rural economy. The monthly survey of bank CEOs in a 10-state Midwest region is at 50.0 for April 2019, which is at growth neutral and down slightly from 52.9 in March.
“Our surveys over the last several months indicate the Rural Mainstreet economy is expanding outside of agriculture. However, this month, 43.8% of bank CEOs indicated that the recent floods were having a negative impact on their local economy,” says Ernie Goss, who chairs Creighton’s Heider College of Business and leads the RMI.
Around 22% of bankers expect an increase in farm loan defaults stemming from recent floods, while 78% expect floods to have little or no impact on farm loan defaults.
Overall, crop farmers seem to have been hit the hardest with flooding damage. Of bankers reporting farm flood damage, around 50% indicated grain farmers incurred the greatest economic damage, while 40% reported livestock producers sustained the greatest flood damage. The remaining 10% said the greatest flood damage was received by farm residences.
“The recent flood event has been devastating to southwest Iowa and eastern Nebraska,” according to Larry Winum, CEO of Glenwood State Bank in Glenwood, Iowa. “It has been a very frustrating process for homeowners, farmers and other businesses who have been unable to get into their homes or businesses because safety issues continue to be a concern.”
Borrowing by farmers for April surged as the borrowing index climbed to 81.3, a record high, from March’s high of 76.7. This is the highest level of farm loans since the survey’s initiation in 2006.
“March floods, tariffs, trade tensions, and anemic farm income negatively influenced the economic outlook of bank CEOs,” Goss says.
A bright spot in the survey is farmland values. The farmland and ranchland-price index for April increased to 45.2—the highest level since February of last year. That’s up from March’s 36.4 and is the 65th straight month the index has remained below growth neutral 50.
Meet the man behind the Rural Mainstreet Index: Ernie Goss