For a fifth straight month, the overall Rural Mainstreet Index sank below growth neutral, according to the January survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.
The region’s overall reading for January rose to 48.1 from 41.7 in December, according to a news release. The index ranges between 0 and 100, with a reading of 50 representing growth neutral.
“Higher interest rates, weaker agriculture commodity prices and a credit squeeze are having a significant and negative impact on Rural Mainstreet businesses and on Rural Mainstreet farmers,” Jim Eckert, CEO of Anchor State Bank in Anchor, Ill., said in the release.
Unless crop prices improve, 2024 will not be a good year for area farmers, Ernie Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business, said in the release.
The region’s farmland price index fell to a still strong 64 from December’s 67.2, the release said.
The farmland price index has remained above growth neutral for every month since November 2019.
“Creighton’s survey continues to point to solid, but slowing, growth in farmland prices. Approximately, 28% of bankers reported that farmland prices expanded from December levels,” Goss said.
The farm equipment-sales index for January sank to 47.9 from December’s weak 49.5.
“This is the seventh time in the past eight months that the index has fallen below growth neutral,” Goss said. “Higher borrowing costs, tighter credit conditions and weaker grain prices are having a negative impact on the purchases of farm equipment.”
On average, bankers estimate that approximately 25% of growers will face transition issues in the next decade.
Of those transitioning, bank CEOs expected 53.8% to transfer ownership to heirs, and 42.3% anticipate the sale to other farmers in the area. Bankers expect virtually no sales to farmers outside the area, including foreign buyers, according to the release.
