Rural bankers say local economy good but worry about spending bill, jobs, supply-chain disruptions for farmers

Creighton University chart compares current month to last month and year ago; click here to download it and chart below.

Rural bankers in the middle of the nation believe their local economies are doing well right now but are less confident about the near future, according to an October survey in 10 Midwestern states that rely on agriculture and energy. The Rural Mainstreet Index rose to 66.1 from September's 62.5, marking 11 straight months above growth-neutral (50). 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 grain prices, the Federal Reserve’s record-low interest rates, and growing exports have underpinned the Rural Mainstreet Economy," wrote Creighton University economist Ernie Goss, who compiles the index. Agriculture Department data "show that 2021 year-to-date agriculture exports are more than 25.4% above that for the same period in 2020. This has been an important factor supporting the Rural Mainstreet economy."

More than 82 percent of bankers surveyed said local farmers were in a "solid cash position with little borrowing needs," while nearly 18% said local farmers' borrowing demand and cash position weren't much changed from the past. No bankers said most local farmers were suffering from financial stress or significant financial stress.

However, the confidence index, which reflects bankers' expectations for the economy six months from now sank to 51.8 from September's 65.4. This month's score is the lowest since November 2020. More than 80% of bankers surveyed said they worried that President Biden's $3.5 trillion spending bill would hurt the economy if passed and implemented. 

Also, jobs continue to be a source of concern. Though the new hiring index rose to 71.4 from September's 67.9, regional non-farming employment is still lower than it was before the pandemic, and labor shortages are still a significant problem for local businesses. 

The supply-chain woes plaguing the nation are hurting farmers, too. Backlogs at domestic transportation hubs such as river ports were the biggest problem for farmers, with 32.1% of bankers reporting so. Processing bottlenecks were the next most common problem, followed by delays in "soft input" purchases such as fertilizer, delays in equipment purchases, and congestion at export hubs (see chart below).