Rural economy continues to slow under ag challenges, continued labor and supply chain disruptions
Iowa’s rural economy continued its slump in July as farmers continue to face challenges from rising input prices and concerns that grain and livestock prices could fall, according to a survey of rural bankers.
Creighton University released its Rural Mainstreet Index last week, and it showed Iowa’s index falling to 45.1 from 49.1 in June. Iowa’s farmland-price index decreased to 68.4 from June’s 77.9. Iowa’s new-hiring index for July fell to 58.7 from June’s 59.0.
The index score ranges from zero to 100 with a score of 50 indicating neutral growth for the next three to six months. It is based on a survey of rural bank managers in about 200 communities with an average population of 1,300.
Iowa’s score mirrored the performance in the 10-state region, which saw its score drop to 46, down from 49.8 in June, the second straight month it fell below neutral growth and the fourth consecutive month of decline.
“The Rural Mainstreet economy is now experiencing a downturn in economic activity. Supply chain disruptions from transportation bottlenecks and labor shortages continue to constrain growth,” said Ernie Goss, the Jack A. MacAllister chair in regional economics at Creighton University. “Farmers and bankers are bracing for escalating interest rates — both long-term and short-term.”
When asked to identify the greatest risk for farmers over the next 12 years, bankers listed rising input prices as the top threat at 53.9%, followed by 34.6% who said falling grain and livestock prices. Just over 11% listed drought as the top risk.
“It’s the combination of higher input costs and a potential fall in commodity prices that are the biggest risks to farmers. Not just one or the other,” said James Brown, CEO of Hardin County Savings Bank in Eldora.
The survey also showed that confidence continued to shrink with the lowest back-to–back scores in the confidence index since April and May 2020. The index dropped to 26 from 33.9 in June.
The region’s farmland price index declined to 66, a steep drop from 76.8 in June. Although still above growth neutral, it was the lowest reading since February 2021.
The farm equipment sales index also dropped sharply to 56.5, down from 71.4 in June, and its lowest reading since January 2021.
The July loan volume index declined to 72, down from 78.5 last month, while the checking deposit index slumped to 47.9 from 57.4 in June. The index for certificate of deposits and other savings also fell, and remained below growth neutral.
While Iowa’s new hiring index declined in July, the regional index score improved slightly and remained above growth neutral in July.
The home-sales index dropped to 48, down from June’s score of 55.4. The retail-sales index for July sank to 46 from June’s 48.2.
“Rising energy prices and higher interest rates reduced home and retail sales on Rural Mainstreet. This is the lowest home sales index since January 2019, and first back-to-back below growth-neutral readings for the retail index since January and February 2021,” Goss said.