Survey finds rural economy weakening

Sinking prices for grain, ethanol cited

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The Creighton University Rural Mainstreet Index for January fell from December’s weak reading, the fifth straight month the overall index has declined, and the lowest reading since August 2009.

The index, which sank to 34.8 from December’s 41.5, is compiled by Creighton University’s Heider College of Business from a survey of bank CEOs in rural Iowa and nine other Midwest states dependent on agriculture or energy. The index ranges between 0 and 100, with a reading of 50 indicating growth neutral.

“Recent declines are the result of lower agriculture and energy commodity prices and downturns in manufacturing,” said Ernie Goss, Creighton University economics professor, in a news release. “Over the last 12 months, prices for farm products have fallen by approximately 15 percent, and for fuels by roughly 20 percent.

“Sinking prices for grain and fuel have had moderate impacts on the region’s ethanol industry. Approximately one-fifth of the bank CEOs reported that ethanol plants in their area had reduced production.”

The January farm equipment-sales index plummeted to a record low 7.0 from December’s record low 8.8.

“The strengthening U.S. dollar and global economic weakness have pushed grain prices down by 8 percent, and slaughter cattle prices 28 percent lower over the past 12 months,” Goss said. “These weaker prices have discouraged farmers from buying additional agriculture equipment.”

Despite weaker crop prices and headcount reductions by businesses with close ties to agriculture and energy, Rural Mainstreet businesses continue to add workers to their payrolls, but at a slower pace. The hiring index decreased to 51.2 from 54.9 in December.

When the bank CEOS were asked to identify the greatest economic threat to community banks this year, half identified rising regulatory costs as the biggest challenge.

“Our regulatory costs now exceed $200,000 per year for a compliance audit,” said Pete Haddeland, CEO of the First National Bank in Mahnomen, Minn.

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