Mainstreet on the Rise
Creighton’s Rural Mainstreet Index reads rural economic condition
As 2012 arrived, mainstreet was giving off signs of new life. The Rural Mainstreet Index was on the rise for the final three months of 2011. In fact, December’s reading from a monthly survey of bank CEOs in agriculturally dependent areas in a 10-state region climbed to its highest level since June 2007.
According to Creighton University economist Ernie Goss, “Growth in the areas of the region and country tied to agriculture and energy are outpacing urban areas. Our survey is detecting a very healthy rural mainstreet economy with the gap between urban and rural widening. Despite our strong December report, I expect Eurozone problems to slow growth in agriculture and energy due to a strengthening dollar and weaker exports. This will tend to push agriculture and energy commodity prices lower in the first half of 2012,” said Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton.
Still, despite world market volatility, the RMI farmland price index rose to a record high in December 2011, climbing to 84.1 from November’s very strong 75.4. “This is the 23rd straight month the index has been above growth neutral. The farm equipment sales index expanded to 73.8, its highest level since February 2008, and up from 68.4 in November,” said Goss. For the December survey, bankers provided the current average cash rent per acre in their area. Across all 10 states, the average cash rent was $191, ranging from $105 in Kansas to $269 in Illinois. Approximately 22 percent of bank CEOs reported average per acre cash rents above $250.
Overall, December’s RMI hiring index advanced to 54.6 from 53.4 in November. “Year over year job growth for rural mainstreet communities is approximately 1.4 percent compared to 0.8 percent for urban areas of the region,” said Goss. And, the economic confidence index, which reflects expectations for the economy six months out, climbed to 61.8 from November’s 57.5.
But silver linings come with touches of gray: the failure of financial derivative giant MF Global has affected agricultural producers in the region according to Goss. Approximately 23 percent of bankers said that the firm’s bankruptcy had a negative impact on their agriculture customers. On the other hand, 52 percent indicated no impacts while the remaining 25 percent reporting that the impacts were unknown at this time.
“I expect the fallout from this bankruptcy to play out in the weeks and months ahead with negative impacts growing as the unknown becomes known,” said Goss.
The survey represents an early snapshot of the economy of rural, agriculturally and energy-dependent portions of the nation. The RMI covers 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. It gives a current real-time analysis of the rural economy.
Today’s Farmer country breakdown
IOWA
The RMI for Iowa slipped to 51.7 from 54.6 in October. The farmland price index increased slightly to 69.3 from 69.2 in October. Iowa’s new hiring index for November declined to 52.5 from October’s healthy 57.5. Iowa’s rural mainstreet employment was up 0.8 percent since the recession began in Dec. 2007.
KANSAS
After increasing for two straight months, the RMI for Kansas declined to a weak 49.1 from October’s 52.9. The farmland price index was unchanged from October’s 64.5. The state’s new hiring index dropped to 50.1 from 56.4 in October. Dale Bradley, CEO of Citizens State Bank in Miltonvale, reported, “The farm economy is still holding up well in our area of Kansas.” Kansas’ rural mainstreet employment was down 4.6 percent since the recession began in Dec. 2007.