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Rural Mainstreet Index Weakens for February
Illinois Ag Connection - 02/21/2020

The Creighton University Rural Mainstreet Index (RMI) declined in February, but remained above growth neutral. This the sixth straight month the reading has moved above growth neutral, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

Overall: The overall index for February declined to 51.6 from 55.9 in January.

"Due to weak farm income, 40.6% of bankers reported that their banks had restructured loans while only 3.1% indicated that their banks had rejected a higher percentage of farmland loans. Approximately, one-fourth of bankers indicated no change in lending practices," said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University's Heider College of Business.

Farming and ranching: After moving above growth neutral in December, the farmland and ranchland-price index has fallen below growth neutral for two consecutive months. Even so, February's reading improved slightly to 46.8 from January's 45.6. This is the 74th time in the past 75 months that the index has been below growth neutral.

On average, bankers reported annual cash rents for nonpasture farmland of $218 per acre. This is down by only 1.5% from the reading recorded four years ago.

The February farm equipment-sales index increased to a weak 37.9 from January's 35.0. This marks the 77th month that the reading has remained below growth neutral 50.0.

Banking: Borrowing by farmers remained weak for February. The borrowing index rose to 50.0 from 48.5 in January, which was its lowest level since February 2013. The checking-deposit index tumbled to 60.9 from January's 76.5, while the index for certificates of deposit and other savings instruments plummeted to 50.0 from 60.3 in January.

This month bankers were asked what percentage of farmland purchases were cash sales. On average bank CEO's reported that 17.3% of farmland purchases were cash sales. This is down from five years ago when bankers indicated 22% of farmland sales were cash sales.

Hiring: The employment gauge dipped to a still solid 57.8 from January's very healthy 61.8. Despite the ongoing trade war and weaker manufacturing in rural areas, Rural Mainstreet businesses continue to hire at a solid pace.

Confidence: The confidence index, which reflects bank CEO expectations for the economy six months out, increased to a healthy 58.1 from January's weak 50.0. February's reading is the highest recorded since June 2013.

"The signing of the Phase 1 trade agreement with China and the USMCA boosted economic confidence across the region with expectations of higher international agriculture sales. The last time Creighton recorded economic confidence this high was when grain prices were double today's values in 2013," said Goss

Home and retail sales: The home-sales index slipped to a still healthy 58.1 from January's 59.1. The retail sales index for February increased to 46.9 from 45.6 in January.

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 Mainstreet Index (RMI) 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, former chairman of the Independent Community Banks of America, created the monthly economic survey in 2005.

The February RMI for Illinois declined to 56.6 from 58.1 in January. The farmland-price index advanced to 48.1 from January's 45.9. The state's new-hiring index decreased to 67.2 from last month's 72.2. Over the past 12 months rural areas in Illinois have experienced job gains of 1.9% compared to a weaker 0.6% for urban areas of the state.

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