Search This Blog

Friday, August 21, 2015

Rural Mainstreet Index Sinks in August

 Cash Rents Expand as Farmland Prices Slump

August Survey Results at a Glance:
• The Rural Mainstreet Index sinks to growth neutral for August.
• Farmland prices decline for the 21st straight month, but cash rents remain strong at $263 per acre.
• On average, bankers expect farmland prices to decline by another 5.8 percent over the next 12 months.
• Housing sales expand at a healthy pace.

Newswise, August 21, 2015 – The Creighton University Rural Mainstreet Index fell for August from July’s tepid 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, sank to growth neutral 50.0 from 53.4 in July.

“This is the first decline in the overall index since March of this year. Weaker conditions among businesses tied directly to agriculture and energy accounted for the downturn in the reading," said Ernie Goss, 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 August increased slightly to 32.7 from July’s 31.4. 

“This is the 21st straight month the index has remained below growth neutral. But, as in previous months, there is a great deal of variation across the region in the direction and magnitude of farmland prices,” said Goss.

This month the survey asked bankers to project the expected change in farmland prices over the next year. On average, bankers reported an estimated decline of 5.8 percent over the next year. Last August when the same question was asked, bankers reported an expected 4.8 percent decrease.

“Bank CEOs were also asked to estimate current cash rents for nonpasture cropland. On average, bankers reported $263 per acre, which is up from $258 reported last year at this time. Additionally, bankers reported an increase in the share of farmland financed from 74 percent last August to 77 percent this month,” said Goss.

The August farm equipment-sales index sank to a very weak 14.2 from July’s 17.9, but was up from June’s record low 12.5. “With farm income expected to decline for a second straight year, farmers remain very cautious regarding the purchase of agricultural equipment,” said Goss.

Banking: The August loan-volume index climbed to 73.0 from 72.1 in July. The checking-deposit index rose to 55.0 from July’s 53.4, while the index for certificates of deposit and other savings instruments dropped to 34.0 from July’s 38.6.

Hiring: Despite weaker crop prices and pullbacks from businesses with close ties to agriculture and energy, Rural Mainstreet businesses continue to add workers to their payrolls. The August hiring index increased to a strong 63.3 from 60.3 in July.

 “Rural Mainstreet businesses continue to hire additional workers, while rural Mainstreet communities are growing jobs at a solid annual pace of approximately 1 percent, primarily in businesses not linked to agriculture or energy,” said Goss.

Confidence: The confidence index, which reflects expectations for the economy six months out, slumped to 42.0 from 46.6 in July. “Declines for agricultural commodity and energy prices pushed bankers’ economic outlook lower for the month,” said Goss.

Home and retail sales: The August home-sales index declined to a strong 70.4 from July’s 73.3. The August retail-sales index decreased to 50.0 from 53.4 in July. “Home sales on Rural Mainstreet have been very healthy over the last several months,” said Goss.

Each month, community bank presidents and CEOs in nonurban agriculturally and energy-dependent portions of a 10-state area are surveyed regarding current economic conditions in their communities and their projected economic outlooks six months down the road. 

Bankers from Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming are included. The survey is supported by a grant from Security State Bank in Ansley, Neb.

This survey represents an early snapshot of the economy of rural agriculturally and energy-dependent portions of the nation. 

The Rural Mainstreet Index (RMI) is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. It gives the most current real-time analysis of the rural economy. 

Goss and Bill McQuillan, former chairman of the Independent Community Banks of America, created the monthly economic survey in 2005.

Colorado: Colorado’s August Rural Mainstreet Index (RMI) dipped to 51.5 from July’s somewhat stronger 53.2. The farmland and ranchland price index expanded to 38.4 from 12.7 in July. Colorado’s hiring index for August advanced to a healthy 65.5 from July’s 52.9.

Illinois: The August RMI for Illinois declined to 50.0 from 53.6 in July. The farmland-price index dropped to 29.5 from July’s 31.6. The state’s new-hiring index increased to 62.0 from July’s 60.5.

Iowa: The August RMI for Iowa dropped to 53.4 from July’s 56.6. Iowa’s farmland-price index for August rose to 44.0 from July’s 43.9. Iowa’s new-hiring index for August jumped to 67.8 from 65.4 in July.

Kansas: The Kansas RMI for August slid to 49.8 from July’s 52.3. The state’s farmland-price index for August increased to 27.8 from July’s 24.6. The new-hiring index for the state expanded to 61.3 from 57.7 in July.

Minnesota: The August RMI for Minnesota fell to 48.4 from July’s 53.9. Minnesota’s farmland-price index declined to 33.7 from 37.4 in July. The new-hiring index for the state declined to a healthy 58.2.

Missouri: The August RMI for Missouri declined to 43.2 from 47.1 in July. The farmland-price index grew to 29.5 from July’s 13.9. Missouri’s new-hiring index decreased to 51.3 from July’s 53.4.

Nebraska: The Nebraska RMI for August slumped to 48.4 from 50.1 in July. The state’s farmland-price index fell to 19.6 from July’s 21.4. Nebraska’s new-hiring index advanced to 58.0 from 56.4 in July. According to Jon Schmaderer, CEO of Tricounty Bank in Stuart, “The high level of moisture in July-August has substantially reduced the cost of irrigation this season.”

North Dakota: The North Dakota RMI for August decreased to 47.1 from 50.6 in July. The farmland-price index fell to 24.8 from 36.5 in July. North Dakota’s new-hiring index declined to 60.1 from July’s 62.4.

South Dakota: The August RMI for South Dakota slipped to 55.1 from July’s 56.7. The farmland-price index rose to 47.2 from 43.0 in July. South Dakota's new-hiring index climbed to 69.1 from 65.0 in July.

Wyoming: The August RMI for Wyoming sank to 49.2 from last month’s 52.5. The August farmland and ranchland-price index expanded to 47.2 from July’s 27.9. Wyoming’s new-hiring index climbed to 60.9 from July’s 59.0.

Rural American population losses continue

  • by Tim Henderson
August 21, 2015 (Pew Charitable Trusts)--Bill Longnecker grew up in rural Nebraska and, after trying life in Kansas City, Missouri, and other urban areas, returned to his home state to start a jewelry store in Red Willow County, population 10,867.

He loves it there.

“All we need is more people,” he said. Every year when high school graduates head off to college, locals present them with a mailbox imprinted with a map of the area. 

“We’re hoping they’ll find their way back,” Longnecker said. Few do.

Population loss is a long-term trend in much of rural America, and it’s gotten more acute since 2010, according to a Stateline analysis. Although 759 rural counties in 42 states lost population between 1994 and 2010, more than 1,300 rural counties in 46 states have lost population since 2010.

As a result, some states with dwindling rural populations, such as Nebraska and Kansas, are trying to lure people with tax incentives, and small, shrinking localities are looking for ways to share services or cut back as the pool of taxpayers shrinks.

They’ve tried shifting schools online in Colorado, and reverting to gravel roads in North Dakota and Michigan. The 251 residents of the village of Brokaw, Wisconsin, have launched an online campaign to raise $2.5 million toward a $3.8 million budget shortfall.

“[Population losses] are immediately a slap to the local funding base for rural counties, because of the loss of property taxes,” said Arthur Scott, who works on rural issues for the National Association of Counties.

“Counties are regionalizing and sharing resources in the face of this rural flight, which is the long-term impact when the younger generation just leaves after college, because there’s no job opportunities that make it fiscally viable for you to return back home,” Scott said.

Enticing College Grads 
Faced with declining rural populations, Kansas decided in 2011 to offer incentives to people who move to a rural county with population losses. Kansas is offering state income tax breaks to people from out of state and will repay a portion of the student loans of Kansans.

Dr. Rachael Cavenee took advantage of the program. She moved to Greeley County in 2013 after attending college in Colorado and graduate school in eastern Kansas. She started an audiology clinic, which allows her time at home with her husband and two children.

Greeley County lost about a quarter of its population between 1994 and 2010, but has gained slightly since 2010, to about 1,300 people. Cavenee said she quickly came to love the area’s friendliness.

“My fear of moving here has evolved into a fear of ever having to move away,” Cavenee said. “This is where you can find genuine, supportive people. This is where we chose to raise our family.”

In a report earlier this year, Kansas estimated that the 330 people who got income-tax breaks in 2014 brought in more than $44 million in economic benefits. That year, 993 people got student-loan subsidies. 
Some analysts are skeptical about the plan’s strategy of paying people to move to rural areas.

The program “may help a few families here and there, which is of course very important for those people and can give positive examples to some communities,” said László Kulcsár, a demographer at Kansas State University.

 “But we have to remember that it was designed to counter long-term depopulation, in which it is terribly ineffective.”

Nebraska started accepting applications this year for enterprise zones that would encourage new businesses in areas with declining population and high rates of poverty and unemployment.

In another effort aimed at rural Kansas, where aging business owners may have trouble cashing out when they retire, the University of Kansas School of Business has a program called RedTire that helps match college graduates to opportunities to buy rural businesses.  

Michelle Reed, who moved to rural McPherson from Orange County, California, this month, said she was struck by the number of help wanted signs, businesses that closed several days a week for lack of employees, and business owners unable to cash out and retire. McPherson is a city of 13,322.

“There are older business owners who would like to sell, but there are no buyers in town,” Reed said. “We need to somehow make it hip to have chickens and farm to table in the heartland, and get the young adults to move east.”

Root Causes
Historically, despite losses in agricultural and mining areas, rural population has grown as suburbia has expanded or retirees sought scenic, low-cost destinations, according to a June report from the U.S. Department of Agriculture (USDA). The department excludes from its definition of rural and small-town areas all commuter areas clustered around cities of 50,000 or more.

Overall, the country’s rural population dipped for the first time between 2010 and 2014, the USDA report said, as the number of people moving to economically hard-hit areas dropped. There were sharp contrasts within individual states. 

An oil boom gave North Dakota the largest rural population gain in the nation at 10 percent, but 16 agricultural counties on the east side of the state lost population.

Coal- and timber-dependent counties have also been hard-hit as those industries founder in the face of less expensive natural gas and as electronic, digital information reduces the need for paper.

High school students in rural Coos County, New Hampshire, a major pulp and paper producer, were asked by researchers if it was easy for somebody their age to get a job in the county (population 31,653). In 2008, two-thirds said it was easy. Three years later, only one in five said so. 

Some of the biggest rural losses are in coal country. The largest population decline from 1994 to 2010 was in West Virginia’s McDowell County, historically the state’s coal capital, which lost 38 percent. It fell another 8 percent since 2010 and the county now has about 20,000 people.

About half the rural counties in Nebraska, North Dakota and Kansas have lost more than 1 in 10 people since 1994.

Some analysts argue that simple math keeps rural college students from going home: Is there a job for me that will pay my student loans, or enough income from a small-town business or farm to support a family? Often the answer is no.

Population decline has been a fact of life in parts of Kansas for 50 years, Kulcsár, the demographer, said. What’s made it worse recently is that there aren’t enough babies to replace people who are moving out and retiring baby boomers are depriving rural areas of a large part of their workforce.

If there’s a chance to lure people back, it may be later in life, after they’ve had children, according to a USDA report released last month. This is especially true for those whose parents still live in their hometowns.

“Conversations about returning home centered on the value of family connections for child raising in a small-town environment,” the report concluded.

About 350,000 people moved out of rural counties between 2010 and 2014. In that time, only 250,000 people were born there. Counties that are more urban had more than 4 million people move in and almost 6 million births.

Effect on Government
Diminished revenue is an ongoing strain on local governments, one that the National Association of Counties thinks should be addressed by counties consolidating services and applying for grants together.

“With regional partnerships, you realize the assets of your neighbors and count on them together,” Scott said. Last year, the group put out a guide to creating regional partnerships, citing examples such as five Minnesota counties that worked to restore a railroad to get crops to market.

School has largely shifted online in Branson, Colorado, where a regional school system has just 52 students remaining in a brick-and-mortar school building, said Lori Green, the school district’s assistant business manager. The system has helped to preserve jobs in a district with shrinking enrollment, Green said. Branson is in Las Animas County, which had one of the biggest rural population losses between 2010 and 2014, with almost one in 10 of its 14,000 residents leaving.

As early as 2010, towns and counties in North Dakota and Michigan were converting paved roads to gravel—and some counties in Ohio were simply letting them erode—to save on maintenance costs, according to a Wall Street Journal report.

Meanwhile, the residents of Brokaw, Wisconsin, which saw its population drop and tax revenue plunge since a paper plant closed in 2012, have raised $756 in their online crowdfunding effort to close the $3.8 million budget gap.

“Without money coming in, you don’t pave the roads, you don’t pick up the trash, you don’t upgrade the sewer system,” said Doug Farquhar, a program director at the National Conference of State Legislatures.