A monthly survey of rural bank chief executive officers in Iowa and nine other Midwest states found some improvement in economic conditions but deep concern about future farm loan defaults.
The Creighton University Rural Mainstreet Index increased to a weak level of 44.1 for July, up from 37.9 in June and April’s record low 12.1.
July’s reading represented the fourth straight month with a reading indicating recessionary economic conditions.
“Farm commodity prices are down by 12.5 percent over the last 12 months,” said Ernie Goss, Creighton professor of economics who compiles the survey results.
“Despite the initiation of $16 billion in USDA farm support payments, only 6 percent of bankers reported their area economy had improved compared to June while 17.6 percent said economic conditions had worsened.”
Falling agriculture commodity prices and farm income have failed to reduce annual farm rents per acre.
Bank CEOs reported average farmland rents of $220 per acre, which is almost unchanged from that reported earlier this year and four years ago.
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Borrowing by farmers expanded for July, but at a slower rate than in June. The borrowing index fell to 57.4 from June’s 63.6.
Bankers estimated that farm loan defaults would rise by 5 percent over the next 12-month period. This is up slightly from 4.8 percent registered a year ago.
Approximately 38 percent of bankers reported a decline in customer visits due to the coronavirus. Almost one-third of bank CEOs indicated the coronavirus had reduced the number of farm loan applications.
New hiring equaled layoffs for July with an index of 50.0 compared to June’s index of 51.5.
“Data from the U.S. Bureau of Labor Statistics indicate that employment levels for the Rural Mainstreet economy are down by 372,000, or 8.5 percent compared to pre-COVID-19 levels,” Goss said. ”It will take many months of 50.0 readings to get back to pre-COVID-19 employment levels for the region.”
Iowa’s July Rural Mainstreet Index increased to 43.1 from June’s 39.4. Iowa’s farmland-price index grew to 49.2 from June’s 48.3.
Iowa’s new-hiring index for July fell to 43.4 from 51.9 in June. Compared to the pre-COVID-19 level, the Iowa Rural Mainstreet economy is down by 57,000 jobs, or 8.6 percent.