Rural bankers plan to raise collateral requirements for farm loans on fears of weak income, a monthly gauge of the rural economy found.
Nearly two-thirds of bankers indicated higher collateral requirements, compared to 45.2 percent in February 2018, according to the Rural Mainstreet Index for February.
The monthly survey found that weak earnings are resulting in higher percentages of banks rejecting farm loan applications—30.3 percent this February, compared to 21.4 percent last February.
"Tariffs, trade tensions, weak agricultural commodity prices and anemic farm income negatively influenced the economic outlook of bank CEOs," said Ernie Goss, an economics professor at Creighton University's Heider College of Business in Omaha, Nebraska.
The overall index sank to 50.2 in February from January's 51.5 but remained above growth-neutral for the 11th time in the past 12 months. The index ranges between 0 and 100 with 50.0 representing growth-neutral.
There was a bright spot in this month's survey. Despite weak farm commodity prices and farm income, rural businesses continue to hire at an improved rate. February's employment gauge climbed to 60.6 from January's 55.7.
"Our surveys over the last several months indicate the Rural Mainstreet economy is expanding outside of agriculture," said Goss.
The Rural Mainstreet Index is a 10-state survey of community bank presidents and CEOs on current economic conditions and six-month economic outlook.