Iowa Public Television


Bankers Survey Suggests Threats to Farm Income

posted on January 16, 2009

OMAHA, Neb. (AP) - High farm expenses and lower crop prices will be the biggest threats to farm income in the year ahead, according to bankers in 11 Midwest and Plains states.

Their expectations were included in the January report on a monthly survey of the bank executives.

The survey's Rural Mainstreet Index dipped slightly this month, to 24.6 from December's 25.0. A year ago, the index stood at 55.7.

An index greater than 50 indicates a growing economy over the next three to six months.

Creighton University economist Ernie Goss and Bill McQuillan, CEO of City National Bank in Greeley, Neb., created the survey, which is conducted in 11 states: Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, South Dakota and Wyoming.

"As agriculture commodity prices have slumped, farmland price growth has moved into negative territory for a third straight month," Goss said in a Thursday news release about the survey. "After peaking at 81.0 in January 2008, the index declined to 36.6 from December's record low 37.1.

"Furthermore, the global economic downturn and elevated farm-input prices continue to put downward pressures on agricultural equipment sales," he said, noting that the farm equipment sales index figure dropped to a record low, to 29.4 from December's 31.6.

More than 58 percent of the bankers surveyed said they expect farm expenses to be the biggest risk to farm viability in 2009, while 42 percent said lower crop prices would be the greatest hazard.

"High input costs, in combination with uncertain crop prices, are a real concern for what lies ahead for the farming sector," said Jeffrey Gerhart, chief executive of the Bank of Newman Grove in Newman Grove, Neb.

The survey's confidence index, which reflects expectations for the economy six months from now, rose but remained in its trough for a fifth straight month. The January figure was 25.9, compared with December's 15.6.

An index on new hires dipped to a record low of 18.3 from December's 25.8

An index on home sales remained weak, although January's 26.7 was up from the record low of 15.9 in December.

At least one banker had an optimistic outlook on the rural economy. Steve Lane, chief executive of Security Savings Bank in Farnhamville, Iowa, said: "The rural economy has not felt the effects of Wall Street. People have backed off from spending, but feel this is because they've been told we are in bad economic times. They still have jobs, they can get loans, and they have no problem making house payments."

Almost 200 communities are represented in the survey. The average community population is about 1,300.

Tags: agriculture banks economy news