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According to the August survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy, the overall Rural Mainstreet Index (RMI) climbed slightly above growth neutral for only the second time in the past six months.

Overall: The region’s overall reading for August rose to 50.3 from 42.1 in July.

Approximately, 47.5% of bankers expect farm income to decline in the next 12 months. Roughly 36.8% anticipate little or no change in farm income, while the remaining 15.7% expect a slight increase in farm income over the 12-month period.

Farm equipment sales: The August farm equipment sales index sank to a very weak 22.2 from July’s 27.8. This is the 36th straight month that the index has fallen below growth neutral.

“Tariffs on imported steel/aluminum and the conflict in Iran continue to create volatility in the agricultural sector. Producers are not as willing to purchase new farm equipment due to volatility, along with low and negative cash flows,” said Goss.

As a result of weak farm equipment sales, bankers reported that borrowing to support farm equipment purchases accounted for only 5.3% of agriculture lending, while real estate loans represented 52.6% of ag lending. Operating loans accounted for 31.4%, livestock loans represented 5.6% and 5.1% accounted for other remaining loans as reported by bank CEOs in August.

Farming and ranchland prices: For the first time since April of this year, the farm and ranchland price index fell below growth neutral. The farm and ranchland index dropped to 47.2 from 52.8 in July.

Confidence: Rural bankers remain pessimistic about economic growth for their area over the next six months. The August economic confidence index slumped to 31.6 from July’s 34.2.

“Weak grain prices, higher input costs and volatility stemming from the Iran war and tariff uncertainty continue to weigh on banker confidence,” said Goss.

The table below summarizes the survey’s findings.

Source: my