Economic outlook remains high among small-town heartland bankers, tempered by concern over drought and land prices

A July survey of rural bankers in 10 Midwest states that rely on agriculture and energy found continued optimism for local economies amid concerns about employment, drought, and more. 

July's Rural Mainstreet Index fell to 65.6 from June's 70, and May's record 78.8, remaining above growth-neutral for the eighth straight month. The index is a survey of bankers in about 200 rural communities with an average population of 1,300 in Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming.

“Solid, but somewhat weaker, grain prices, along with the Federal Reserve’s record-low interest rates, and growing exports have underpinned the Rural Mainstreet Economy. Even so, current rural employment remains below pre-pandemic levels," reports Creighton University economist Ernie Goss, who compiles the index.

Farmland prices remained strong, staying above growth-neutral for a record tenth straight month. For July, the farmland index fell to 71 from June's 75.9. Surveyed bankers worry the trend won't last; the average CEO surveyed projected farmland price growth for the next 12 months at 2.4%.

Weather remains a significant concern; 47% of bankers reported damaging drought conditions for farmers. Jobs are another issue; despite recent gains, U.S. Bureau of Labor Statistics data show that nonfarm employment for the Rural Mainstreet economy is 1.3%, or 55,000 jobs, below pre-pandemic levels.