After moving below growth neutral in February, the Rural Mainstreet economy has moved above the 50.0 threshold for two straight months according to today’s April survey of bank CEOs in a 10-state area.
Overall: The Rural Mainstreet Index (RMI), which ranges between 0 and 100, with 50.0 representing growth neutral, increased to 53.2 from 50.1 in March and 48.4 in February.
“The overall index for the Rural Mainstreet Economy indicates that the areas of the nation highly dependent on agriculture and energy are experiencing much slower growth than for the same period in 2013. However, recent boosts to agriculture commodity prices should boost the economy in the months ahead,” said Ernie Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton University Heider College of Business.
This month bankers were asked to name the biggest challenge for farmers for this year’s planting season. Almost one-third, or 31.5 percent reported that low agriculture-commodity prices were the greatest threat to farming profitability. Approximately 27.8 named lack of adequate moisture and 27.6 indicated high input prices were the biggest challenges for crop farm operations. Another 13.0 percent indicated high cash rents represented the greatest 2014 challenge for crop farmers,”
Farming and ranching: The farmland and ranchland-price index for April increased slightly to 42.9 from March’s very weak 40.9. “This is the fifth straight month that the farmland and ranchland-price index has moved below growth neutral. With the Federal Reserve continuing to withdraw its economic stimulus, I expect rising interest rates to put even more downward pressures on farmland prices and cash rents,” said Goss.
Farm equipment sales remained below growth neutral for the 10th straight month. The April index rose to a frail 36.7 from March’s even weaker 29.3. “Agriculture equipment and implement dealers in the agriculture based areas are experiencing very weak sales to farmers in the region even as farm equipment manufacturers are experiencing positive growth due to healthy sales abroad,” said Goss.
This month bankers were also asked to estimate the breakeven price for corn production in their service area. “Bank CEOs, on average, indicated that the break-even corn price was approximately $4.30 per bushel. This is down from a breakeven price of $4.84 recorded in our February 2013 report,” said Goss.
Jim Ashworth, president of Carlinville National Bank in Carlinville, Ill., said, “Of course, break-even is different for each farmer; yet for mid-Illinois corn we believe our range is $3.75 - $4.25.”