2024 Ag Economy: What's Causing Rural Bankers To Be Pessimistic

Creighton University has released its January Rural Mainstreet Index – a survey of bank CEOs living in rural communities across a 10-state region.

This month’s survey marks the fifth-straight month where the index has been below the growth neutral mark.

Ernie Goss, PhD, Jack A. MacAllister Chair in regional economics at Creighton University’s Heider College of Business, shares the continued pessimism from the rural bankers surveyed can be attributed to a few different things.

“We're talking about somewhat weaker agricultural commodity prices and likewise, the higher interest rates are beginning to cut into what's going on at the farm,” Goss shared on the AgriTalk podcast. “Also, the global economic slowdown – whether that's in China, Asia or Europe – is having some impacts on the farm economy. That's what bankers are telling us.”

Attitudes toward the economy, however, may be on the rise. While the January survey was still below growth-neutral with a reading of 48.1, it was actually up from December’s reading of 41.7. The index ranges between 0 and 100, with a reading of 50.0 representing growth neutral.

Goss says the long-term outlook for agriculture is still very positive, with little issues in the short-to-intermediate-term outlook – especially for ag retailers. 

“Delinquencies are up a bit, but less than one percentage point – so that's the good news. I think it's more to do with what's going on in rural main street businesses,” he says. “That will be the retailers and the farm equipment sellers. They're seeing some slowdowns and that's what bankers are seeing reporting on.” 

Echoing Goss’ point is the survey’s farm equipment-sales index. In January, it dropped to a reading of 47.9 from December’s reading of 49.5 –marking the seventh time in the past eight months the number has been below growth neutral. 

A Bright Spot
More optimistic areas of the survey revolved around farmland. This includes the farmland price index, which read 64.0 and has been growth neutral every month since November 2019, as well as the outlook for farmland transition.

When asked about the share of farm clients facing generational transition, the bankers expected 53.8% to transfer ownership to heirs and 42.3% to sell to other farmers in the area. 

“In my judgment, there’s too much hype about the sales going to the Chinese and sales going to others outside [of the country],” Goss says. “It's mostly within the community, and that's good in my judgment. That bodes well in the long term for the agricultural sector.”

To hear more from Goss, listen to this episode of AgriTalk.