Rural Bankers Rank the Greatest Threats for 2022
For 14 straight months, the rural economy has posted healthy and consistent growth. That’s according to the January Rural Mainstreet Index (RMI) from Creighton University.
For January 2021, the RMI sits at 61.1. That is down from December’s 66.7. The index ranges between 0 and 100 with a reading of 50 representing growth neutral and is generated by a monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.
“Solid grain prices, the Federal Reserve’s record-low short-term interest rates, and growing agricultural exports have underpinned the Rural Mainstreet Economy,” says Ernie Goss, who chairs Creighton’s Heider College of Business and leads the RMI.
This month, bankers were asked to identify the greatest 2022 risk for farmers in their area. Here are the threat rankings from the bankers:
- Rising input prices.
- Disruptions of delivery for farm inputs.
- Rising interest rates
- Less federal financial support
- Tariffs and trade restrictions
“Increased input costs have raised our average farmer breakeven points, but current commodity prices still produce moderate gains in all areas of financial statements,” reported Jim Brown, CEO of Hardin County Savings Bank in Eldora, Iowa. “Our loan reviews show an increase in working capital, net worth and lower leverage in almost every case.”
On average, bank CEOs expect the Federal Reserve to raise short-term interest rates by 0.70% (70 basis points) in 2022. Around 19% of bankers expect four or more one-quarter percentage point rate hikes in 2022.
“Inflation is a serious problem here. Gasoline prices have nearly doubled since November 2020,” added Jim Eckert, president of the Anchor State Bank in Anchor, Ill. “Food prices are up well above what's claimed by the government.”
The region’s farmland price index decreased to a very strong 88.5 from December’s record high of 90. January’s reading represented the 16th straight month the index has moved above growth neutral.
The January farm equipment-sales index slipped to a very healthy 72.4 from 74.1 in December. This is the 14th straight month that the index has advanced above growth neutral. Readings over the past several months are the strongest string of monthly readings recorded since Spring 2011.
After declining for five consecutive months, the confidence index, which reflects bank CEO expectations for the economy six months out, rose for a second straight month to 61.1 from 55.2 in December.
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.
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