The October Rural Mainstreet Index didn’t contain a lot of good news for the farm economy. Dr. Ernie Goss of Creighton University conducts the survey and talks about the results.
“Well, our survey of bank CEOs in rural areas in ten states in this mid-section of the country, the overall index, which ranges between zero and 100, has been below growth neutral for 14 straight months. It has a lot to do with the grain side, which is very weak. On the livestock side, it’s not so weak. So it’s a tale of two areas of agricultural economy. In terms of grain, we’re talking about in a recession, most farmers out there, whether it’s corn, soybeans, or wheat, prices are below the breakeven point.”
Lower grain prices are helping the livestock market stay steady for now.
“Well, it’s certainly helpful. Livestock, I won’t say it’s robust, but it’s better. It’s somewhat better. Of course, the domestic market’s holding up pretty well, although the consumer is stretched out there right now. We have to wait and see how that plays out in the coming months. But right now, the consumers on the lower end are very heavy in debt, and they’ll have to be cutting back on some of those beef purchases and moving down to chicken or some other less expensive meat product.”
He says interest rates are still a challenge for the ag economy.
“Interest rates are still too high on the long end, especially. Now, the Fed did reduce interest rates about the third week of September, and that brought down the short-term rates, and that would be, of course, for the farmer, that would not include mortgages and farmland purchases. But on the short end for operating loans, those are lower by 50 basis points or a quarter percent, but they’re still running between over eight percent in terms of operating loans. But when the Fed cut interest rates on the short end, the long end – long term interest rates – for example, the ten-year treasury moved up, and farmland interest rates on the purchase of farmland moved up.”
The other indicators that the Index monitors are down as well.
“Farm equipment sales declined for the 15th straight month. Of course, that may improve with lower interest rates, but we have to wait and see. That hasn’t turned up yet, and the numbers we’re getting from most of our indicators are down to a four-year low. Farmland prices are not as tough there. We’ve seen for the fifth time in the past six months that farmland prices sank, but even there, not as much as farm income. Farmland prices are holding up reasonably well. Of course, exports, doing fairly well there on the export of agricultural products.”