Weak Farm Prices in Rural America

Economic activity in the nation’s heartland is not where it should be, and farm prices are a major culprit, according to the Rural Mainstreet Index.

Rural areas that rely on agriculture and energy aren’t doing well, the Rural Mainstreet Index for April finds. (Photo By: Getty Images/iStockphoto)

Rural areas that rely on agriculture and energy aren’t doing well, the Rural Mainstreet Index for April finds. (Photo By: Getty Images/iStockphoto)

"Weak farm commodity prices continue to squeeze Rural Mainstreet economies. Over the last 12 months, livestock commodity prices have tumbled by 5.8 percent and grain commodity prices have slumped by 4.5 percent," said Ernie Goss, an economist at Creighton University's Heider College of Business and author of the monthly index.

"The U.S. Department of Agriculture is estimating 2017 will mark the fourth consecutive year that farm income has declined. This downward trend has pushed our survey results into negative territory," Goss said.

The index measures economic growth in a 10-state region dependent on agriculture and energy on a scale of 0 to100. In April, it fell to 44.6 from 45.3 in March. That's 20 months in a row of subpar economic activity since the index last was growth neutral in August 2015.

In particular, the price index for farmland and ranchland, a key component of the overall index, dropped to what Goss called a "frail" 30.7 from 33.0 in March, the 41st straight month it has been below 50. Farm equipment sales were at 21.5.

"We are seeing a lot of farm auction sales the last six months. Both retirement and getting out of farming," said Pete Haddeland, CEO of the First National Bank in Mahnomen, Minnesota.

A bit of good news: Borrowing by farmers is at a record level and the percentage of banks rejecting loan applications is down from the same time in 2016.

However, that does not reflect much optimism on the part of bankers, Goss said. The confidence index, which reflects expectations for the economy six months out, slipped to 45.6 from 47.5 in March.

"Until agricultural commodity prices begin to trend higher, I expect bankers' economic outlook to remain weak," Goss said.

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