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Rural bankers in 10 Midwestern states that rely on agriculture and energy report local economies that are still growing, but less than in recent months because of inflation and supply-chain problems, according to a monthly survey in May. The Rural Mainstreet Index polls bankers in about 200 rural places averaging 1,300 population in Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming.
The overall index fell to 57.7 in May, down from April's 62. That's still growth-positive, but marks the index's lowest point since February 2021. "Much like the nation, the growth in the Rural Mainstreet economy is slowing. Supply chain disruptions from transportation bottlenecks and labor shortages continue to constrain growth. Farmers and bankers are bracing for escalating interest rates — both long-term and short-term," writes Creighton University economist Ernie Goss, who compiles the index.
Increased farming input costs have pushed borrowing to its highest reading since May 2020. Meanwhile, "the region’s farmland price index for May sank to a still strong 72.0 from 80.0 in April, marking the 20th straight month that the index has moved above growth neutral," Goss writes. "Over the past several months, the Creighton survey has registered the most consistent and strongest growth in farmland prices since the survey was launched in 2006."
Most bankers polled, 70.4%, said the Federal Reserve Open Market Committee should raise interest rates by 0.50% when it meets in mid-June. A plurality of 34.6% said that average local non-irrigated croplands (but not pasturelands) will fetch more than $300 cash rent per acre this year. And most predict that 2022 net farm income will be somewhat higher than last year's (33.4%) or about the same as last year's (37.0%). Only 3.7% believed it would be much higher.
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