Friday, February 19, 2016

Midwest's Rural Mainstreet Index increases for first time since August, but outlook still pessimistic

After dropping for five straight months the Midwest's Rural Mainstreet Index rose in February from 34.8 to 37 points, Jeff Stein reports for Public News Service. The increase still "shows a distinct lack of optimism about the rural economy." The index in January was 34.8, down from 41.5 in December. The index has now been below 50 for six straight months, which indicates economic decline.

Ernie Goss, an economist at Omaha's Creighton University, which creates the index, "said it appears farmers are more overextended at banks than at this time last year, but it isn't a cause for alarm," Stein writes. Goss told him, "The farmers still remain in reasonably good condition. This is nothing like a return to the 1980s, where the farmers mortgaged their land up significantly, and we are moving into a territory where the farmer is getting more leverage than before."

He "said continued low commodity prices primarily are to blame for the negative outlook," Stein writes. Only 8.7 percent of bankers "said their local economy is expanding, while more than a third— almost 37 percent—called theirs a recession. Goss said he believes market conditions will improve in the second half of 2016, with some cautions."

Goss said, "2016 is going to be somewhat like 2015, a bit challenging for the rural areas. For example, farmland prices still coming down; we're seeing cash rents, cash land rents, for the region coming down a bit... What we need to see going forward is at least international trade improving, also a turnaround in the global economy—and tack on a weaker dollar, that would all push the agricultural economy into positive territory. But right now, it's not in the immediate horizon." (Read more)

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