(Shenandoah) — Continuing concerns about drought conditions combined with other factors are putting a damper on KMAland’s rural economy.
So says August’s Rural Mainstreet Report. The latest survey of bank CEOs in 10 Midwestern states–including Iowa, Nebraska and Missouri–showed this month’s index at growth neutral, or 50.0. That’s a drop from July’s reading of 55.6, and ends a four-month streak of above-growth-neutral readings. Speaking on KMA’s “Morning Line” program Monday morning, Creighton University Professor Dr. Ernie Goss says the continuing drought–coupled with hot temperatures in states like Nebraska and Kansas–make for a sour rural Midwest economy.
“Hot weather is really putting downward pressure on what yields and what we’re going to see in terms of soybeans, corn and wheat,” said Goss. “That’s, of course, having some impact on the overall outlook, and that would be the confidence index, which moved very low this month.”
In fact, this month’s business confidence index dropped dramatically from 44.4 in July to 38.9 last month. Goss says other factors include a decline in farmland rent numbers.
“When you talk about farmland rents–of course, rents for grain production–they expect on the average 1.3% growth in cash rents going forward,” he said. “That’s low, low, low and much lower that what we’ve seen in the past. Farmland prices continue to growth, even with the outlook not very good for agriculture right now.”
The region’s farmland price index dropped to 60.0 from 64.6 in July. Another major concern is the contraction of agriculture exports from $8 billion in the first half of 2022 to $6.8 billion for the same period in 2023. Goss blames the global economic decline for the slump in ag exports.
“What we’re seeing right now–all across the board–is a weaker global economy,” said Goss, “a weaker U.S. economy. Of course, the U.S. and regional economy has not weakened as much as our trading partners.”
Goss adds respondents remain skeptical that the Federal Reserve will decline another interest rate hike at its September meeting. He says a majority expect “a hard landing” or negative growth from the Federal Reserve’s rate hikes.
“When we talk about a soft landing–in other words, when the fed brings the economy down–higher interest slows the economy down, but not to the point to where you have significant increases in unemployment,” he said. “Now, our bankers, about 60% think it’s going to be a hard landing or a bumpy landing.”
You can hear the full interview with Dr. Ernie Goss here:
Creighton University Economics Professor Dr. Ernie Goss analyzes the latest Rural Mainstreet Index report for August.