Despite Headwinds, Farmland Prices On The Rise

Farmland prices are still increasing despite a lack of Farm Bill negotiations and corn prices approaching sub $4. The farmland price index increased in this month's survey and has been above growth neutral for an astonishing 46 months, although bankers believe prices will decrease slightly as we enter 2014. The Rural Mainstreet Index (RMI) was unchanged in November and has been above growth neutral for 14 straight months.

The Rural Mainstreet Index (RMI), ranging between 0 and 100 with 50.0 representing growth neutral, was unchanged this month and remains above growth neutral at 54.3. Ernie Goss, economist at Creighton University, commented, “The overall index for the Rural Mainstreet Economy continues to point to positive, but slow economic growth in the months ahead.”

The farmland price index increased for only the second time in the last 12 months to 54.3 from 50.9 in October. Goss noted, “Despite the expansion in the index for the month, I expect farmland prices to grow at significantly slower rates for the first six months of 2014 than they did for the same period in 2013. In the November survey almost half, 49.1 percent, bankers indicated they expect farmland prices to decline by an average of 1 percent over the next 12 months."

Bankers were asked this month if they agreed with the Environmental Protection Agency's recommendation of lowering the 2014 mandated ethanol blend. Of bankers surveyed, only 13.6% agreed with the Environmental Protection Agency.

For the fifth month in a row, farm equipment sales were below growth neutral at 47.3. “According to bankers in our survey, farmers continue to reduce their purchases of big ticket items such as farm equipment,” said Goss.

The loan-volume index decreased to 56.9, from October's 64.7. The checking-deposit index increased considerably, to 72.0, from 48.3 last month.

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