Ranchland- price index rises to a weak 49.1

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After moving below growth neutral in February, the Rural Mainstreet economy has moved above the 50.0 threshold for four straight months, according to the June survey of bank CEOs in a 10-state area. However, the index was down from May signaling slower growth.

Overall:  The Rural Mainstreet Index (RMI), which ranges between 0 and 100, with 50.0 representing growth neutral, fell to 53.6 from May’s 55.6.

“The overall index for the Rural Mainstreet Economy indicates that economic conditions of the areas of the nation highly dependent on agriculture and energy are positive, but somewhat weaker compared to this time last year,” said Ernie Goss, Ph.D., the Jack A. MacAllister Chair in Regional Economics at Creighton University Heider College of Business.

Almost half, or 47.3 percent, of bankers reported that higher beef and pork prices have increased overall economic activity in their area.  Most of the remaining bankers indicated little livestock production in their area or very low livestock inventories restrained gains.

However, some bankers anticipate a downside to higher livestock prices. According to David Steffensmeier, president of first Community Bank in Beemer, Neb., “High beef and pork prices will cause the same problems that high grain prices did the last few years - unreasonable expectations

Farming and ranching: The farmland and ranchland-price index for June rose to a weak 49.1 from May’s even weaker 46.7. “Despite the slight improvement, this is the seventh straight month that this index has moved below growth neutral. Stronger farm commodity and grain prices over the last several months appear to have put a floor under farmland prices. I expect the index to move above growth neutral next month,” said Goss. 

The June farm-equipment sales index inched forward to 35.0 from 33.6 in May. The index has been below growth neutral for 12 straight months. “Despite improving economic activity on the regional farm, agriculture equipment and implement dealers in the region are experiencing very weak sales to farmers in the region.  On the other hand, farm equipment manufacturers continue to experience positive growth due to healthy sales abroad,” said Goss.

This month bankers were asked what share of farmland that was sold for cash and what share sold to investors and non-farmers. On average, approximately 23.7 percent, or almost one-fourth, of the farmland sales were cash purchases, which is down from 28.4 percent last year at this time when the survey asked this same question.

Bankers reported that the percent of farmland purchased by nonfarm investors sank to 14.4 percent from 19.7 percent this time last year. “Consistent with declines in farmland prices, we are tracking less interest among nonfarm investors in terms of farmland purchases,” said Goss.



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