Creighton University Rural Mainstreet Index (RMI) for May increased slightly from April’s record low. According to the monthly survey of bank CEOs in rural areas of a 10-state region that includes Illinois, May’s reading represented the third straight month with close to record lows.
The overall index for May increased to 12.5 from April’s record low 12.1, but down significantly from March’s weak 35.5. The index ranges between zero and 100 with a reading of 50, representing growth neutral.
The May index for Illinois dipped to 8.7 from 8.9 in April. The farmland price index decreased to 38 from April’s 39.4. Jeff Bonnett, president of Havana National Bank in Springfield, expects the Rural Mainstreet economy to be up six months from now if the COVID-19 lockdown has ended.
“Since this time last year, livestock and grain prices have sunk by 19.1% and 4.7%, respectively. Accordingly, approximately 73% of bankers reported restructuring farm loans. As a result of the restructuring, bank CEOs expect farm loan defaults to expand by only 5.4% in the next 12 months,” said Ernie Goss, Ph.D., Jack A. MacAllister Chair in Regional Economics at Creighton University's Heider College of Business.
Farmland prices continue to slide. May’s reading fell to 39.7 from April’s 40.9. This is the 77th time in the past 78 months the index has been below growth neutral.
The May farm equipment sales index increased slightly to 21.9 from 20 in April. This marks the 80th straight month that the reading has remained below growth neutral.
According to recently released U.S. Court data calculated by the American Farm Bureau Federation, Chapter 12 family farm bankruptcies for the 12-month period ending March 2020 rose to 627 filings, a 23% increase from the previous 12 months. While this is well below the filings in the 1980s, it still raises concerns for rural communities across the U.S.
Rural Mainstreet Bank CEOs expect farm loan defaults to expand by only 5.4% during the next 12 months. Almost three-fourths of bankers have restructured farm loans to deal with weak farm income.
The confidence index, which reflects bank CEO expectations for the economy six months out, sank to 22.1 from April’s 27.4. Weak agriculture commodity prices and layoffs have decimated economic confidence among bankers.