State of the Farm Economy

I continue to look for sources of information about the state of the farm economy with a view to trying to find an appropriate time to purchase stocks in agricultural equipment manufacturers and distribution companies.  (See previous post for the list of potential companies.)  My thesis is that equipment purchases will increase once farmers feel more optimistic.  The key to this will be an increase in farm incomes.  As mentioned in a previous posts, average farm incomes have declined by almost 50 percent since 20013.  It is not generally appreciated just how dire things are:

 https://www.agriculture.com/news/business/net-farm-income-expected-to-drop-12-this-year-usda-says

Read this for a comprehensive overview of the state of agriculture in America's agricultural heartland:

2019 Agricultural Outlook





No wonder that sales of farm equipment are stale.

A Few Useful Sources

I have expanded the list of my go-to sources of information about the state of the farm economy.  There are two recent additions.

The Rural Mainstreet Index is supported by Creighton University.  It is a treasure trove of information.

Survey Methodology

Each month, community bank presidents and CEOs in nonurban, agriculturally and energy-dependent portions of the 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.

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.

The Man Behind the Rural Mainstreet Index 

Worth reading for context.

Here is a synopsis of the January 2019 survey results:

January Survey Results at a Glance:

· Overall index moves above growth neutral for the 11th time in past 12 months.

· More than four of 10 bank CEOs expect farm loan defaults to be biggest 2019 challenge.

· More than one third of bankers support the Federal Reserve holding on 2019 rate hikes.

· Only 22.9 percent, or slightly more than one in five, bankers reported expanding economic conditions in their area.

OMAHA, Neb. (Jan. 17, 2019): The Creighton University Rural Mainstreet Index for January fell, but remained above growth neutral, according to the monthly survey of bank CEOs in rural areas of a 10-state region dependent on agriculture and/or energy.

Some noteworthy observations:

"Our surveys over the last several months indicate the Rural Mainstreet economy is expanding outside of agriculture. However, the negative impacts of tariffs and low agriculture commodity prices continue to weaken the farm sector," said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University?s Heider College of Business.

The January farm equipment-sales index climbed to 40.9 from December?s 37.1. This marks the 65th consecutive month that the reading has remained below growth neutral 50.0.

The Creighton University web site is worth exploring as it provides an excellent window on taking the pulse of the community.

A few observations:

• The economy appears to be stuck in neutral ... rolling slightly forward, but at a snail's pace.  
• The "Trump effect" has been decidedly negative.  
• I noticed that one business has shifted its supplier from China to India.  Is this the beginning of a wider trend?  

The CoBank

CoBank is one of the largest private providers of credit to the rural economy, delivering loans, leases and other financial services to agribusiness and rural infrastructure in all 50 states.

The Quarterly U.S. Rural Economic Review is interesting.  The most recent one is entitled:

Agriculture Limps into 2019

Worth reading in its entirety.