Iowa’s rural economy grew at a slower pace in June as growth in farmland values slowed and nonfarm employment continued below pre-COVID-19 levels, according to a survey of rural bankers.

Some Iowa bankers also raised concerns about increasing drought across the region and the growing federal deficit, helping to slow optimism about the rural economy.

According to Creighton University’s Rural Main Street Index, Iowa’s June index sank to 63.7, down from 79.9 in May. The report, released on June 17, showed that the state’s farmland price index fell to 72.7, down from 78.6 in May, and although Iowa’s new-hiring index climbed slightly to 68.5 from 68.4, nonfarm employment remained more than 15,000 jobs, or 2.3%, below pre-pandemic levels.

Overall, the index for June fell to 70.0, down from a record high of 78.8 in May. The index ranges between zero and 100, with 50 representing neutral growth.

The index is based on a survey of bank presidents and CEOs in about 200 agriculture- and energy-dependent communities with an average population of 1,300. The rural bankers are surveyed about current economic conditions in their communities and their projected outlooks for the next six months. Bankers in Iowa, Illinois, Kansas, Minnesota, Nebraska, Colorado, South Dakota, North Dakota and Wyoming are included in the survey.

According to the survey, 46.7% of bank CEOs reported that their local economy expanded from May to June.

“Strong grain prices, the Federal Reserve’s record-low interest rates, and growing exports have underpinned the Rural Mainstreet Economy. Even so, current rural economic activity remains below pre-pandemic levels,” said Ernie Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton University.

Despite strong grain prices, several bankers raised concerns about growing areas of severe and extreme drought across the region.

“Continued dry conditions will start to have an effect on markets and crops soon,” Steve Simon, CEO of South Story Bank and Trust in Huxley, said in the report.

About one-fourth of the bankers surveyed said they were concerned about a downturn in farm income, and about the same number expressed concern about rising government regulation.

Larry Winum, CEO of Glenwood State Bank in Glenwood, said he is concerned about the rising federal debt, and argued that neither political party, nor the Federal Reserve, is engaging in serious talks about reducing it.

“In my view … no real plan to reduce that debt, or balance the annual budget is the biggest threat to our economy’s success,” he said in the report.