A recent survey of rural bankers indicates that the 2012 drought did not significantly weaken the financial position of farms and other businesses in the region, Creighton University economist Ernie Goss said Thursday.
His Rural Mainstreet Index for January fell to 55.6 from 60.6 in December, still indicating growth at a moderate pace, Goss said.
Goss said he was surprised to hear 80 percent of bank CEOs surveyed in the 10-state area reporting that the drought had no impact on farmland prices, and 60 percent expect moderate to no impact if the drought continues in 2013.
“Rural, agriculturally dependent communities in the region appear to have shed the negative impacts of the 2012 drought,” Goss said.
But he said some bankers anticipate that a downturn in the national economy will weigh on the farm economy.
The index, tracking rural economic growth, is taken from surveys of bank presidents and CEOs in 200 rural communities across the Midwest and Plains.
Several components of the index fell in January: The farmland price index fell to a still-healthy 71.5 from 82.5 in December, while the farm equipment sales index fell to 63.8 from 67. A number above 50 indicates growth.
“Despite continuing drought conditions in much of the region, growth in farmland prices, cash rents and farm equipment sales remain strong,” Goss said.
The loan-volume index “plummeted” to 39.0 from 62.1 in December while indices on checking and savings deposits rose.
“Banking data appear to indicate that the 2012 drought did not weaken, to any great extent, the financial positions of farms and businesses in the region,” Goss said.
The hiring index slipped to 52.4 from 53.5, indicating new hiring continues at a modest pace.
Home and retail sales indices both fell, but the “confidence” index remained unchanged at 55.5, with Goss noting, “Bankers are reporting healthy current economic growth and expect this growth to remain strong for the first half of 2013.”
Nebraska's index didn't fare as well as other states'. The high price of farmland helped push the state's rural growth forecast into negative territory in January for the first time since September.
Nebraska's Rural Mainstreet Index fell to 48.8 from 57.4 in December, taking into account higher land prices and a slowdown in new hiring.
Iowa's index also fell, but remained in positive growth territory, at a value of 59.0 compared to 63.6 in December.
“Strong earnings, working capital and net worth increases are still the norm, thus the continued increase in land values in central Iowa,” one Iowa CEO reported.
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