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Rural economy bounces higher on home sales

By Larry Dreiling

Agriculturally based regions have experienced a steady growth in home sales. Main Street bankers in the High Plains and Midwest have noted that the farm economy has cushioned the impact as the country recovers from the financial recession in 2008. This photo was taken in the Ford County, Kan., in the agriculturally based community of Bucklin. (Photo by Holly Martin.)

Growth strengthened for the Rural Main Street economy over the past month, according to the April survey of bank chief executive officers in a 10-state area.

The Rural Mainstreet Index of 10 states with substantial rural economies, which ranges between 0 and 100 with 50 representing growth neutral, climbed to 58.3 from March's solid 56.9.

The farmland price index dipped to a still strong 66.9 from March's 67.2. This is the 41st consecutive month that the farmland-price index has been above growth neutral. The farm equipment-sales index declined to 57.3 from 60.5 in March.

"Crop farmers and businesses linked to crop farming and energy continue to experience very positive economic conditions with improving balance sheets," said Ernie Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton University.

However, there are some negative outcomes from the agriculture expansion. Rapidly increasing farmland prices are causing concerns for bankers.

David Callies, CEO of Miner County Bank in Howard, S.D., said, "Increased agriculture land prices and rent cost are hurting our smaller operators as well as younger, beginning farmers."

Bank CEOs were asked about the share of farmland sold to nonfarm investors and the proportion of farmland sold for cash. Bankers indicated that almost one in five, or 19.8 percent, of sales were to nonfarm investors.

This is almost identical to last April's 21 percent. Bankers reported that approximately 28.6, only slightly less than last April's 29 percent, of farmland sales were for cash.

"Despite very strong growth in farmland prices, bankers are indicating little change in investors' appetite for farmland. Likewise, farmland price growth over the past year in excess of 20 percent for parts of the region did not alter the share of land purchases for cash," Goss said.

In the banking sector, the loan-volume index moved above growth neutral for the month. The index soared to 66 from 51.5 in March. The checking-deposit index declined to 63 from March's much stronger 70.5 while the index for certificates of deposit and other savings instruments sank to 40.4 from last month's 42.4.

"Banking data validate the region's healthy farm income and an expanding Rural Main Street economy," Goss said.

Jim Ashworth, vice chairman of CNB Bank and Trust in Carlinville, Ill., reported very positive economic activity for both rural and urban bank locations with farmers in rural areas increasing their purchases of land and equipment.

March's hiring index slipped to 57.5 from March's 59.4.

"The rate of new hiring over the past several months is now back to pre-recession levels," Goss said.

The confidence index, which reflects expectations for the economy six months out, strengthened to 56.3 from 52.3 in March.

"Despite recent pullbacks in commodity prices and questions about the global economy, Rural Main Street bankers are more upbeat about the economy," Goss said.

For a third straight month the homes-sales index took a large positive jump. The April home-sales index advanced to a record 70.8 from March's 69.2. The April retail-sales index slipped slightly to 51.4 from 51.6 in March.

Each month, 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. Bankers from Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming are included.

This survey represents an early snapshot of the economy of rural, agriculturally and energy-dependent portions of the nation.

The Rural Main Street Index is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. It gives the most current real-time analysis of the rural economy. Goss and Bill McQuillan, president of CNB Community Bank of Greeley, Neb., created the monthly economic survey in 2005.

Colorado: For a seventh straight month, Colorado's Rural Mainstreet Index remained above 50. The April RMI slipped a bit to a still strong 73.1 from March's 75.2. The farmland and ranchland price index expanded to 83 from March's 71.2. Colorado's hiring index for April expanded to 68.8 from March's 67.8.

Iowa: The April RMI for Iowa dipped to 62.3 from March's 65.2. The farmland-price index expanded 70 from March's 66.7. Iowa's new-hiring index for April weakened slightly to 60.2 from 61.3 in March.

William Hess, CEO of Iowa Savings Bank in Carroll, said, "Recent rain has improved attitude and outlook, and forecast is more rain, so perhaps a return to normal conditions and yields which will impact the ag picture."

Kansas: The Kansas RMI for rocketed to 61.8 from 52.8 in March. The farmland-price index sank to a still very healthy 65.5 from 69.1 in March. The state's new-hiring index decreased to 56.6 from 57.8 in March. Minnesota: The April RMI for Minnesota slid to 66.7 from 66.8 in March. Minnesota's farmland-price index sank to 67.1 from March's 72.1. The new-hiring index advanced to 61.5 from 59.8 in March.

Missouri: The April RMI for Missouri soared to 71.7 from March's 56.3. The farmland-price index for April fell to 70.8 from 74.1 in March. Missouri's new-hiring sank to 60.7 from 61.1 in March.

Nebraska: After moving below growth neutral for January, Nebraska's Rural Main Street index broke above growth neutral for three straight months. The April RMI expanded to 57.3 from March's 54.9. The farmland-price index for April was unchanged from March's 65.4. Nebraska's new-hiring index dipped to 57.1 from 58 in March.

"Recent later winter, early spring rains and snow has helped our moisture situation and improved the farmers outlook. Crop ground and pastures will benefit," said Jeffrey Gerhart, chairman of the Bank of Newman Grove.

South Dakota: The April RMI for South Dakota fell to 57.2 from 58.8 in March. The farmland price index grew to 67.4 from March's 62.4. South Dakota's new-hiring index for April slipped to 55.4 from 58.4 in March.

"Moisture this week has improved the spring outlook," Callies said.

Wyoming: The April RMI for Wyoming advanced to 55.1 from 52.8 in March. The April farmland and ranchland price index decreased to 58.0 from 61.8 in March. Wyoming's new-hiring index climbed above growth neutral with an April reading of 53.2 down from March's 53.9.

Larry Dreiling can be reached by phone at 785-628-1117, or by email at

Date: 5/6/2013


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