Rural communities across the Midwest continue to face economic challenges as low commodity prices and rising production costs weigh heavily on agriculture, according to the latest Rural Mainstreet Index from Creighton University.
The May Rural Mainstreet Index fell to 45.7, marking the fourth consecutive month below the growth-neutral benchmark of 50. Any reading below 50 indicates economic contraction in rural areas.
Ernie Goss, economist at Creighton University, said ongoing weakness in agriculture is affecting the broader rural economy.
"Weakness in farm commodity prices and elevated agriculture input costs are spilling over into the rural business community," Goss said.
Nearly 48% of rural bankers surveyed reported that farmers' financial conditions have worsened compared to a year ago, reflecting continued pressure on producers as operating expenses remain high.
Farm equipment sales remain one of the weakest sectors. The farm equipment sales index dropped to 18.2 in May, extending a streak of 33 consecutive months below growth-neutral levels. Rural bankers cited higher fuel prices and production costs as key factors reducing farm profitability and limiting equipment purchases.
Despite the financial headwinds, there was some encouraging news for agricultural trade.
Agricultural exports from the 10-state region included in the survey increased 7.5% during the first quarter compared to the same period last year. Exports to China saw a particularly sharp increase, rising nearly 77%.
While stronger exports may provide some support for producers, the survey suggests most rural communities continue to grapple with difficult economic conditions as farmers balance lower commodity prices against persistently high input costs.
The Rural Mainstreet Index is a monthly survey of community bank CEOs serving rural areas across a 10-state region heavily dependent on agriculture and energy.
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The Rural Mainstreet Index is a unique index that covers 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. The index provides the most current real-time analysis of the rural economy. Goss and the late Bill McQuillan, former Chairman of the Independent Community Banks of America, created the monthly economic survey and launched it in January 2006.