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Rural bankers' confidence in economy shaken; farmers brace for rising interest rates

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Economic confidence is slipping among rural bankers in 10 Midwest and Plains states including North Dakota.

Creighton University's Rural Mainstreet Index in July fell for the fourth straight month and sank below growth-neutral for a second consecutive month.

The survey's overall economic index slumped to 46.0, down from 49.8 in June and 57.7 in May. Any readings above 50 on the index that ranges from 0 to 100 suggests growth in the months ahead. Readings below 50 suggest contraction.

“Supply chain disruptions from transportation bottlenecks and labor shortages continue to constrain growth," said Creighton economist Ernie Goss, who oversees the survey. "Farmers and bankers are bracing for escalating interest rates -- both long-term and short-term.”

Bankers were asked to identify the greatest risk for farmers over the next 12 months. About 54% named rising input prices, 35% indicated falling grain and livestock prices, and 11.5% reported drought as the top threat.

“It's the combination of higher input costs and a potential fall in commodity prices that are the biggest risks to farmers. Not just one or the other,” said James Brown, CEO of Hardin County Savings Bank in Eldora, Iowa.

The survey index measuring the economic confidence of rural bankers fell to 26.0, down from 33.9 in June. It marks the lowest back-to-back readings since the beginning of the coronavirus pandemic in April and May of 2020.

The index is based on a survey of rural bankers in Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming -- states dependent on agriculture and/or energy. It focuses on about 200 rural communities with an average population of 1,300 people.

North Dakota's index for July sank to 51.7 from 58.0 in June. The state’s farmland price index plummeted to 70.0 from 81.7 the previous month. The state’s new-hiring index dropped to 61.2 from June’s 63.6.

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