Rural Economy Slows While Farmland Values Stay Strong

The rural economy seems to be set on cruise in neutral gear. That’s according to the Rural Mainstreet Index (RMI) from Creighton University. 

For February 2023, the RMI sits at 50.1, down from 53.8 in January. This was the third straight month the overall reading stayed above the growth neutral threshold. 

The index ranges between 0 and 100, with a reading of 50.0 representing growth neutral and is generated by a monthly survey of bank CEOs in rural areas of a 10-state region that are dependent on agriculture and/or energy.  

“The Rural Mainstreet economy continues to experience slow economic growth,” says Ernie Goss, who chairs Creighton’s Heider College of Business and leads the RMI. “Only 7% of bankers reported improving economic conditions for the month with 85% indicating no change in economic conditions from January’s slow growth.”  

Meanwhile, the region’s farmland price index decreased to 63.5 from January’s 66. This was the 29th straight month that the index has advanced above 50.   

As a result of solid farm financial conditions, the farm equipment-sales index stood at 52.1, which was down significantly from January’s 61.4. The index has risen above growth neutral for 25 of the last 27 months.  

The February survey polled bankers on importance of ethanol, as the region contains 73% of the nation’s ethanol plants and accounted for 76% of U.S. ethanol capacity for 2022. 

Around 90% of bankers with an ethanol plant in their area indicated it was an important industry for their local economy.  

To meet President Biden’s CO2 reduction goal contained in his Inflation Reduction Act, ethanol plants would be required to reduce their CO2 emissions by 40% by 2030. This will likely mean the capture and sequestration of the CO2 or the closure of a high share of the plants.   

Around 60% of bankers support this process assuming adequate compensation to farms over which the pipelines cross. Around 23% of bankers expect that the use of imminent domain will be required to allow underground pipelines to cross farmland in their area. 

The slowing economy, higher borrowing costs and labor shortages continued to constrain the business confidence index to a weak 44.4, but up from 40.4 in January. 

“Over the past 11 months, the regional confidence index has fallen to levels indicating a very negative outlook,” Goss says. 

The RMI, which started in 2005, represents an early snapshot of the economy of rural agricultural and energy-dependent portions of the nation. It focuses on 200 rural communities with an average population of 1,300.