Drought, Low Prices Dog Rural Economy

A combination of poor farm prices and subpar rainfall continues to hamper rural America, according to a monthly gauge of economic activity.


The economy in small-town America continues to suffer from low agriculture prices. (Photo By: Getty Images/iStockphoto)

The Rural Mainstreet Index, compiled by Creighton University’s Heider College of Business, rose slightly to 42.2 in August on a 100-point scale from 40.7 in July.

But the report card, based on input from small-town bankers and CEOs in 10 states, remained well below the neutral growth mark of 50.

“We continue to record economic weakness stemming from low agriculture commodity prices and fallout from the drought in parts of the region,” said Ernie Goss, an economist at Creighton, who directs the study.

“Approximately 57.6 percent of bankers reported drought conditions were having a negative impact on agriculture production in their area,” he said.

The index is considered the most current real-time analysis of activity, encompassing 200 rural communities in the nation’s heartland that depend on agriculture and energy. It stood at or just above the neutral 50 mark in May and June before plummeting the last two months

Part of the falloff is tied to a drop in cropland rent values. Bankers reported a yearly cash rent of $241 per acre, a 4.3 percent drop from $252 per acre in August 2016.

On average, bankers expect farmland prices to decline by another 3.5 percent during the next year, Goss added, though that is better than a projected 6.9 percent decline reported in August 2016.

The confidence component of the index, which reflects expectations for the economy six months out, slid to 35.6 in August from 38.4 in July.

“Concerns about trade combined with drought conditions in portions of the region sank bankers’ economic outlook,” Goss said.