Creighton University’s Rural Mainstreet Index shows ag equipment sales in Iowa and nine other Midwestern states have reached a near record low. Creighton University economist Ernie Goss says it’s clear the ag economy is facing some “headwinds.”
“Now with the Federal Reserve about to announce today their interest rate decision, which I expect no change, but even without a change the value of the dollar has been,” Goss says. “And that continues to put downward pressure on agricultural commodity prices.”
The Federal Reserve announcement about interest rates is scheduled for early this afternoon. Goss surveys rural bank CEOs every month and his index for mid-September reflects a “growth neutral” or status quo reading.
“In the case of Iowa, things are a little bit stronger there. We’re seeing the rural Main Street communities doing somewhat better and I think that can be traced back to businesses on Main Street,” Goss says, “not so much those connected to agriculture and energy, but those that are connected to more of the traditional manufacturing.”
Goss found a slight improvement in farmland prices in Iowa over the past month.
“Now cash rents continue to increase across the region,” Goss says. “That’s not a good sign for those farmers that are cash renting and seeing their revenues come down because of lower agricultural commodity prices and, of course, their expenses are either up or at least not moving down.”
Ag income is expected to be down for the second year in a row and that’s depressing ag equipment sales according to Goss.
“That’s affecting the dealers in these rural communities, but also the large manufacturers whether that’s John Deere or others and then, of course, the metal manufacturers that produce for the agricultural equipment manufacturers, so there’s a lot of weakness out there, but again, for the month that Iowa number was much stronger than the region and that’s pretty good news for Iowa,” Goss says. “Not quite as strong as this time last year, though.”
Goss’s Mainstreet Index was up slightly in Minnesota and Missouri, but it slumped a bit in Illinois, Kansas, Nebraska and the Dakotas.