(NewsDakota.com/NDAgConnection.com) – For the third straight month, Creighton University’s Rural Mainstreet Index (RMI) climbed above the growth-neutral threshold of 50.0, according to the latest monthly survey of rural bank CEOs from 10- State region dependent on agriculture and/or energy.
Overall: The region’s aggregate remained above the growth-neutral threshold in February. The February index fell to 50.1 from 53.8 in January. The index ranges from 0 to 100, with a value of 50.0 representing neutral growth.
“The rural main street economy continues to experience slow economic growth. Only 7.4% of bankers reported improving economic conditions for the month, with 85.2% saying economic conditions had not changed since January’s slow growth,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Heider College of Business, Creighton University.
Agriculture and Livestock: The region’s farmland price index fell to 63.5 from 66.0 in January. This was the 29th consecutive month that the index has risen above 50.0.
Farm Equipment Sales: As a result of solid farm financial conditions, the farm equipment sales index came in at 52.1, well down from the much stronger 61.4 in January. The index has risen above growth neutral for 25 of the last 27 months.
Banking: The February Lending Index fell to a much weaker 48.1 from 58.0 in January. The index of checking deposits fell to 38.5 from 70.0 in January, while the index of certificates of deposit and other savings vehicles was at a solid 57.7 but well below January’s record high of 72.0.
Hiring: The new February Hiring Index fell to 48.1 from 53.9 in January. Labor shortages remain a significant problem constraining the growth of rural main street businesses. Despite the labor shortage, Rural Mainstreet has expanded non-farm employment by 3.4% over the past 12 months. This compares to a 2.6% growth for urban areas in the same 10 states over the same period.
Ethanol: Unsurprisingly, ethanol is a key industry for the region, comprising 72.9% of the country’s ethanol plants and accounting for 75.8% of 2022 US ethanol capacity. Approximately 88.4% of bank CEOs reported having ethanol facilities in their rural area. Approximately 91.3% of bankers with an ethanol facility in their economy indicated that it was an important industry to their local economy.
To meet President Biden’s carbon reduction target included in his Inflation and Deficit Reduction Act, ethanol plants would need to reduce their carbon emissions by 40% by 2030. This will likely mean capturing and sequestering the CO2 or shutting down a high proportion of the plants.
Bankers were asked for their position on the delivery of CO2 via pipelines for sequestration. Regarding the capture and sequestration of CO2 from ethanol plants in their area, about 63.0% of bankers support this process, provided that the farms through which the pipelines cross are adequately compensated. Approximately 23.1% of bankers expect that the use of an imminent area will be required for underground pipelines to traverse farmland in their area.
Jim Eckert, CEO of Anchor State Bank in Anchor, Illinois, echoed the sentiment of some bankers, stating, “I think carbon storage is another ‘green’ scam. CO2 is not a greenhouse gas. Plants like and need it!”
Confidence: The slowing economy, higher borrowing costs and labor shortages continued to push the business confidence index to a weak 44.4, but rose from 40.4 in January. “Over the past 11 months, the regional confidence index has fallen to levels that indicate a very negative outlook,” Goss said.
Home and Retail Sales: The home sales index fell to a weak 37.0 from 38.5 in January. “This is the ninth straight month that the home sales index has fallen below neutral growth. A nearly doubling in 30-year mortgage rates over the past year and low inventories slowed home sales in the region over the period,” Goss said.
The February retail sales index slipped to 50.0 from 51.9 in January. “Nevertheless, bankers were bearish on the economic outlook as retail sales for the first quarter of 2023 were under pressure,” Goss said.
The survey provides an early snapshot of the economy of rural, agricultural and energy-dependent parts of the nation. The Rural Mainstreet Index is a unique index covering 10 regional states and focusing on approximately 200 rural communities with an average population of 1,300. The Index provides the most up-to-date, real-time analysis of the rural economy. Goss and Bill McQuillan, former chairman of the Independent Community Banks of America, created the monthly business survey and launched it in January 2006.
North Dakota’s RMI for February fell to 50.4 from 58.9 in January. The state’s farmland price index fell to 63.5 from 71.7 in January. The state’s new employment index fell to 48.5 from 56.4 in January. North Dakota, with 3.1% of the country’s ethanol plants, accounted for 3.1% of U.S. ethanol capacity and ranked seventh in the 10-state region for ethanol production in 2022.
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