Rural index at highest point in 5 months

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Posted: Friday, May 17, 2013 12:00 am

Rainfall totals are climbing and so is an outlook on the rural economy.

In its highest level since December, the Rural Mainstreet Index grew to 58.8 from 58.3. The index, based on a survey of rural bankers in 10 states, ranges from 0 to 100, with 50 being growth neutral.

The index also revealed a dip in bankers' six-month confidence to 54.5 from 56.3. The majority of bankers said that low agriculture commodity prices are their greatest threat to the farm-based economy this year, naming the drought and the “bursting of the farmland price bubble” as their second- and third-greatest fears.

The index was created by Creighton University economist Ernie Goss and Greeley, Neb., banker Bill McQuillan.

Bankers this month also sounded off about federal policies they say are negatively affecting job creation and business growth.

The farmland price index dipped to a still-strong 62.1 from 66.9 and the farmland equipment sales index dropped to 52.4 from 57.3. While the farmland price index has been above growth neutral for more than three years, the index has now declined for the fifth time in the past six months.

Goss said the rising value of the U.S. dollar — 5 percent since the beginning of the year — is “a factor pushing farm commodity prices downward.”

“For example, corn prices have slumped by almost 10 percent since December of last year,” he said. “This trend, which I expect to continue in the months ahead, has taken a bit of the air out of farmland price growth and farm-implement sales growth.”

Charles Helscher, president of Farmers Savings Bank in Keota, Iowa, said the good news is that the drought, at least in southeast Iowa, appears temporarily over. Excessive rain and some flooded bottom ground, however, has delayed planting.

Both Nebraska and Iowa's farmland price indexes dropped. Nebraska's to 53.9 from 65.4 and Iowa's to 60.7 from 70. Nebraska's overall index remained above growth neutral for the fourth consecutive month, inching up to 57.7 from 57.3. Iowa's overall index dipped to 58.1 from 62.3.

Overall, the hiring index increased to 59.8 from 57.5. Goss said that despite solid job creation, rural areas are still not back to pre-recession employment levels, and government data show that regional employment is off more than 1.2 percent.

Michael Flahaven, president of Wenona State Bank in Wenona, Ill., said federal policy is having a negative impact on job creation.

“The health care reform act will likely affect employment in this area in the months ahead,” he said. “The Dodd-Frank regulations will adversely affect community banks.”

Goss said, “We are recording more and more reports of negative economic fallout from Dodd-Frank.”

Contact the writer: emily.nohr@owh.com

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