Rural Bankers: Farmland Prices At Record Highs
For the tenth straight month, the rural economy is showing growth, according to the Creighton University Rural Mainstreet Index (RMI). For September 2021, the RMI fell slightly to 62.5 from August’s 65.3. The index ranges between 0 and 100 with a reading of 50 representing growth neutral.
“Solid grain prices, the Federal Reserve’s record-low interest rates, and growing exports have underpinned the Rural Mainstreet Economy,” says Ernie Goss, who chairs Creighton’s Heider College of Business and leads the RMI. “USDA data show that 2021 year-to-date agriculture exports are more than 27.6% above that for the same period in 2020. This has been an important factor supporting the Rural Mainstreet economy.”
Around 35% of bank CEOs reported their local economy expanded between August and September.
The region’s farmland price index advanced above growth neutral for a twelfth straight month to a record high 85.2 from August’s strong 76.6. Here are the state-by-state farmland price indexes:
- Colorado: 88.3, up from 68 August
- Illinois: 88.2, up from 75.7 in August
- Iowa: 87.1, up from 71.1 in August
- Kansas: 84.5, up from 72.6 in August
- Minnesota: 89, up from 76.7 in August
- Missouri: 81.1, up from 69.7 in August
- Nebraska: 86.2, up from 73.3 in August
- North Dakota: 83.8, up from 70 in August
- South Dakota: 87, up from 74.7 in August.
- Wyoming: 84.7, up from 71.2 in August
The September farm equipment-sales index climbed to 66 from 64.7 in August. Readings over the last several months represent the strongest consistent growth since 2012.
Bank CEOs were asked: As part of his American Families Plan, President Biden proposes to eliminate the stepped-up basis for inherited assets. For the agriculture sector, this change would have ____?
The top results are:
- Negative and devastating: 50%
- Negative and significant: 32%
- Negative but not significant: 11%
“More than eight of 10 bankers expect, if implemented, the stepped-up basis portion of President Biden’s $3.5 trillion bill before Congress to have a negative impact on the Rural Mainstreet economy,” Goss says.
“The stepped-up basis for inherited assets (farmland) is critical to the preservation of the family farm,” adds Jeff Bonnett, president of Havana National Bank in Havana, Ill. “If approved this will be a game changer for family farms. This proposal will also impact any family-owned small business (Main Street vs Wall Street) that also has the goal of passing on their business to the next generation.”
Around 64% of bankers expect the Federal Reserve to begin reducing their economically stimulative monthly bond purchases before the end of 2021.
“I expect this pullback in monthly purchases to push long term interest rates slightly higher in the fourth quarter of 2021,” Goss says.
The confidence index, which reflects bank CEO expectations for the economy six months out increased for the first time since May of this year to 65.4 from August’s 59.7.
“Improving farm exports, healthy agriculture prices, and healthy consumer spending pushed the economic outlook upward,” Goss says. “On the other hand, 53.6% of bank CEOs reported the Delta variant of Covid-19 was having rising negative economic impact.”
This 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.
