Trade, Ag Prices Impact Rural Economy

After October’s slight increase, a key barometer of the health of rural America’s economy slipped in November.

Slumping ag prices are taking a toll on the rural economy, according to the latest Rural Mainstreet Index. (Photo By: Getty Images/iStockphoto)

Slumping ag prices are taking a toll on the rural economy, according to the latest Rural Mainstreet Index. (Photo By: Getty Images/iStockphoto)

The Rural Mainstreet Index came in this month at 44.7 on a scale of zero to 100. That's down from 45.3 in October.

"Concerns about trade, especially current NAFTA negotiations, and low agriculture commodity prices, impaired bankers' economic outlook," said Ernie Goss, an economics professor at Heider College of Business at Creighton University, which produces the index.

"Since peaking in 2013, farm commodity prices have declined by approximately 17 percent, and U.S. farm income has fallen for four straight years," Goss noted. So he said it was not surprising that the Index "has risen above growth neutral only three times in the past three years."

The Index surveyed community bank leaders in a 10-state area, including Jeff Bonnett, president of Havana National Bank in Havana, Illinois. He said many of his farm customers experienced record yields with this year's harvest.

"Like them, we are all hoping that this is enough to offset the yet again low commodity prices that challenge the ag economy today," Bonnett said.

Given the downturn in farm income, 53 percent of the bankers said they increased collateral requirements for farm loans, while 22 percent said they rejected a higher percentage of farm loan applications.

As for bright spots in November's report, the home-sales index rose from 52.5 in October to 56.6 this month. And the retail sales index inched up to 40.7 in November, compared to 39.3 in October. But, as Goss noted, "Much like their urban counterparts, Rural Mainstreet retailers are experiencing significant pullbacks in sales."

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