Both short-term and long-term interest rates have dipped recently, making this the perfect time to buy that much-wanted land or take out a new operating loan.
“If I need cash or anticipate needing cash, now is a great time to borrow,” says Ernie Goss, economist with Creighton University Heider College of Business. “If I were a farmer looking for a mortgage and I were looking to borrow, I’d be borrowing right now.”
Short-term rates, those used in operating loans, are expected to remain low until July 2015, according to the Federal Reserve Bank.
“Longer-term loan rates might go up before then,” says Goss. “If inflation picks up, long-term rates could pick up.”
Goss conducts a survey of about 210 bankers serving agriculture and rural communities in a 10-state region in the central United States to develop Creighton University’s rural main street index (RMI). In May, the index increased to 55.6 from April’s 53.2. A number above 50 represents growth, while a number below represents contraction.
Ready Credit
“Credit is readily available,” says Goss. “We don’t see any real concerns or limitations from regulators. Loan volumes for operating loans are still pretty strong, and were higher in May than they were a year ago.”
The rural main street economy is also adding jobs at a pace well above the long-term average.
“The region’s employment has returned to pre-recession levels,” says Goss.
The confidence index, which reflects expectations for the economy six months into the future, fell to 51.6 from last month’s 54 as international discord and threats to agricultural exports reduced banker confidence.
Vermont Spillover?
Rural bankers were asked three questions in this month’s survey including whether they expected expansion of Vermont’s recently passed law requiring labeling of genetically modified food to spill over into other states and affect the rural economy. About half, 49 percent, indicated that they expected the new law to have negative economic consequences.
Other highlights include farmland values, which had dipped in recent months, appear to be stabilizing.
“Stronger farm commodity and grain prices over the last several months should put a floor under farmland prices in the months ahead,” says Goss.
May’s farm-equipment sales index sank to 33.6 from April’s 36.7, marking the 11th straight month below growth neutral.
“Agriculture equipment and implement dealers are experiencing very weak sales to farmers in the region even as the farm equipment manufacturers are experiencing positive growth due to healthy sales abroad,” notes Goss.
By Fran Howard, Agweb.com