The Rural Mainstreet Index for December was unchanged from November’s reading according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.   

Overall: The Rural Mainstreet Index (RMI), which ranges between 0 and 100, for December was 50.0, unchanged from November, but up from 43.4 in October.

“Lower energy and grain prices continue to restrain growth in the rural economy,” said Ernie Goss, Ph.D., Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business.

Farming and ranching: The farmland and ranchland-price index for December advanced to a weak 38.6 from November’s 30.0. “Much weaker crop prices continue to take the air out of the bubble in agricultural land prices. This is the 13th straight month that the index has moved below growth neutral,” said Goss.

The December farm-equipment sales index expanded to 23.7 from 18.6 in November.  The index has been below growth neutral for 17 straight months. “This month, we asked bankers how they expected farmers to adjust their expenses to the likelihood of lower revenues,” said Goss. “Approximately 63.6 percent expect farmers to put off equipment purchases even more due to predicted revenue decline.”

In anticipation of lower farm revenues, almost one in five bankers, or 18.2 percent, anticipates that farmers will cut cash rents, 7.3 percent expect farmers to wait for better seed deals, and 3.6 percent and 7.3 predict less fertilizer and chemical usage.

Howard Schaan, CEO of First State Bank of Harvey, N.D., said, “We have seen some temporary decreases in rents based on low commodity pricing.”

Banking: The December loan-volume index soared to 76.7 from November’s solid 56.2. The checking-deposit index expanded to 62.1 from November’s 57.9, while the index for certificates of deposit and other savings instruments grew to a weak 44.0 from last month’s 37.7.

Hiring: Despite weaker crop prices and pullbacks from businesses with close ties to agriculture and energy, rural Mainstreet businesses continue to hire at a solid pace. The December hiring index slipped to a solid 55.2 from November’s very healthy 61.9. “Businesses on Rural Mainstreet continue to add jobs at a healthy pace even with the weaker agriculture conditions and lower energy prices. Year-over-year job growth for the region is now approximately 1.8 percent, which is well above the historic average,” said Goss.

Confidence: The confidence index, which reflects expectations for the economy six months out, sank to 42.5 from 44.7 in November. “Much weaker crop prices and declines in energy prices have negatively affected the outlook of bank CEOs over the last several months,” reported Goss.

Larry Rogers, executive vice-president of First Bank of Utica in Utica, Neb., said, “(I) did not expect crop prices to drop this far and we really are not sure what the six-month to one-year effect will be.”

Home and retail sales: The December home-sales index grew to a tepid 51.7 from November’s 51.0. The December retail-sales index rebounded to 55.3 from 50.0 in November.

This month, Fannie Mae and Freddie Mac announced plans to allow first-time homebuyers to pay a down payment as little as 3 percent on a home purchase. Many bankers expressed concerns regarding such a program, including Jeff Bonnett, president at Havana National Bank in Havana, Ill., who said, “I still have a bad taste in my mouth regarding ‘subprime lending’ that helped create the ‘Great Recession’ that we are just now getting out of.”

Bankers were asked to assess the 2014 holiday retail-buying season in their area. “Approximately 5.2 percent expect the strongest buying season since the recession, 60.3 percent predict that the gain for 2014 will be the same as the gain for 2013, and 32.8 percent expect little or no increase from 2013 buying.  The remaining 1.7 percent of bankers anticipates the weakest buying season since the beginning of the recession,” said Goss. 

According to Pete Haddeland CEO of the First National Bank in Mahnomen, Minn., “We are seeing increased spending for the holidays because of the reduction in gasoline prices.”