After declining below growth neutral in March, the overall Rural Mainstreet Index for July expanded above the threshold for a fourth straight month, according to the July monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

Overall: The region’s overall reading in July slipped to 55.6 from June’s 56.9. The index ranges between 0 and 100, with a reading of 50.0 representing growth neutral.

July 2023 Survey Results at a Glance:

• July’s overall reading, the Rural Mainstreet Index (RMI), rose above growth neutral for a fourth straight month. 
• Farmland prices expanded for the 34th straight month.
• On average, non-farm investors secured approximately 17.1% of farmland sales in the region, up from 9.1% reported by bankers in April 2022.
• More than nine of ten, or 92.5%, indicated that the Fed should cease raising rates.

“After negative growth during the first quarter of this year, the Rural Mainstreet economy experienced positive but slow economic growth for the second quarter and has now started the third quarter on a healthy note,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

Farm equipment sales: The farm equipment-sales index for July stood at a tepid 50.0, which was up from 48.3 in June. “Higher borrowing costs have begun to negatively impact purchases of farm equipment,” said Goss.

Farming and ranching land prices: The region’s farmland price index rose to 64.6 from 59.3 in June and 56.3 in May. This was the 34th straight month the index has advanced above 50.0. 

Bankers reported, on average, non-farm investors secured approximately 17.1% of farmland sales in their area over the past six months. This is almost double the 9.1% reported by bankers in April 2022 when the same question was asked. 

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The Creighton University Overall Rural Mainstreet Index (RMI) fell below growth neutral for a sixth consecutive month, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

“The Rural Mainstreet economy is now experiencing a downturn in economic activity. Last month, almost one in four bankers, or 23.1%, reported that the economy was already in a recession,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University.

Farm equipment sales: The farm equipment-sales index jumped to a strong 59.5 from October’s weak 47.8. The index has risen above growth neutral for 22 of the last 24 months.

This month, bankers were asked if their bank was asking for greater upfront financial commitments for farm loans. Only 13.6% indicated an increase in such commitments. The remaining 86.4% reported no change in upfront commitments for farm loans.

Farming and ranching: The region’s farmland price index rose to 68.2 from October’s 58.0. This was the 26th straight month that the index has climbed above 50.0.

Bankers were also asked their expectations for the direction of farmland prices in the next 12 months. Approximately, 60.9% expect farmland prices to plateau at current prices, while 21.7% expect prices to decline over the period. The remaining 17.4% of bankers expect prices to expand, but at a slower pace.

Banking: The November loan volume index dropped to a still strong 65.8 from 76.8 in October. The checking-deposit index increased to 47.7 from October’s 34.0, while the index for certificates of deposit and other savings instruments slipped to 45.5 from 46.2 in October.

“Higher farm input costs, greater farm equipment sales, and drought conditions in portions of the region supported strong borrowing from farmers,” said Goss.

Confidence: The slowing economy, strong energy prices, higher borrowing costs and elevated agriculture input costs pushed the business confidence index down to 27.3 from 30.8 in October. “This is the lowest reading for the confidence index since May 2020,” said Goss.

The survey represents an early snapshot of the economy of rural agriculturally and energy-dependent portions of the nation. The Rural Mainstreet Index is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. The index provides the most current real-time analysis of the rural economy. Goss and Bill McQuillan, former chairman of the Independent Community Banks of America, created the monthly economic survey and launched it in January 2006.

In Iowa, less than two weeks after a piece of farm ground sold for $19,000 per acre, a new record sale was set. The selling price this time was $22,600 per acre for 80 acres of ground in Grundy County.

“The farm did have a wind turbine on it,” said Jim Rothermich of Iowa Appraisal and Research. “The buyer was an investor-buyer, and the runner-up was also an investor. So, the wind turbine income stream did help the purchase price reach that high, but most of that 80 acres, or the lion’s share, was all farmland.”

Rothermich, who tracks farmland sales and values in Iowa, says while the new state-wide record sale was eye-popping, it was only one of the county-wide record sales he has seen recently.

“Last week was just amazing,” he said. “I think there were five counties that set new price records last week. As a matter of fact, in Carroll County, which is in west-central Iowa, they set a record on Aug. 20 of $17,600 an acre and broke it just six days later with a sale of $18,300 an acre. That is how strong this market is, and it’s still moving up.”

Rothermich said farmland prices were high from 2012 to 2014, but he thinks sales in the state will exceed those price levels this fall.

Farmland values are also climbing in Illinois. The latest Chicago Federal Reserve Ag Credit Survey shows a 14 percent jump in farmland prices year over year during the second quarter, which marks the largest recorded increase since 2013.

The Illinois Society of Professional Farm Managers and Rural Appraisers conducted their own survey and found that during the first half of the year, farmland prices in the state rose by 20 percent. They say that’s happened in only four out of the last 51 years.

The Ag Economy Barometer, which surveys 400 farmers by phone each month, indicates that farmers remain bullish about farmland values.

Both the short-term and long-term Farmland Values Expectations Indices rose in August by four points. Although both indices are below their springtime peaks, they remain near their all-time highs since data collection began in 2015.

Sources: AgWeb, Purdue University/CME Group