(Omaha) — Falling farmland and commodity prices continue to bog down the KMAland economy.
Creighton University’s Rural Mainstreet Index report sank below growth neutral for the 12th straight month. The survey of bank CEOs in a 10-state region–including Iowa, Nebraska, and Missouri–shows August’s overall reading at 40.9– down from 41.3 in July and the lowest reading since November 2023. Speaking on KMA’s “Morning Line” program Monday, Creighton University Economics Professor Dr. Ernie Goss says weak farmland and commodity prices are the main culprit behind the struggling Midwest economy.
“Farmland prices moved below growth neutral for the 3rd time in the last four months, but what we’re seeing is that commodity prices are just not there,” he said. “Look at corn, soybean, wheat–all of them have hit lows. Livestock is doing somewhat better. But, that’s below breaking even for a lot of farmers out there.”
Data from the International Trade Association also shows that exports of agricultural goods and livestock are down by $198 million, or 3.6%, from this time last year. Goss says regional exports are another drag on the rural economy, citing decreased exports from China and other trading partners.
“That has something to do with the strength of the dollar and the weakness of those foreign currencies,” Goss explained. “Japan has had some issues that are quite considerable and those come back to get the US quite quickly as we see things weaken there and other trading partners.”
Meanwhile, August’s farm equipment sales index slumped to 16.7, its lowest level since January 2017. Goss says several factors are leading to farmers buying less equipment.
“With commodity prices down they take a more cautious approach, farm income is also down for 2024 from this same period last year and it’ll continue to be lower than we’d like it to see,” said Goss. “Of course, higher interest rates will also reduce any interest a farmer has in buying new equipment over trying patching up the old equipment.”
Highlighting the struggles of the agriculture industry, Goss says, is the price decline in shares of the VanEck Agribusiness ETF, which includes companies such as John Deere–dropping from over $90 a share to roughly $70 a share. Despite the struggles in the agricultural sector, the August loan volume index rose to 75–up from July’s 67.4.
“As farmers see their prices come down and their resources are stretched, they’ll seek loans and that’s what we’re seeing,” said Goss. “But, what’s good news is that delinquency rates are up only 1.1% over the last six months.”
In the August survey, only 22.8% of bankers reported that the current business conditions were worse than prior to the COVID-19 pandemic. Meanwhile, 18.2% indicated business conditions were better, and the remaining 59% felt that conditions had barely changed. However, Goss says respondents are still pessimistic about economic growth over the next six months. He expects the Federal Reserve to cut interest rates following its meeting in September. You can hear the full interview with Goss below:
Creighton University Economics Professor Dr. Ernie Goss joins the “Morning Line” to discuss the August Rural Mainstreet Index, a survey of bank CEOs in a 10-state region in the Midwest, including Iowa, Nebraska, and Missouri.