A survey of rural bank CEOs showed a continued economic downturn in June, with one-third of those surveyed reporting shutdowns of ethanol plants in their communities, according to the recently released Creighton University Rural Mainstreet Index.

The survey showed the index increased from May but remained weak, climbing to 37.9, up from 12.5 the previous month but still well below the neutral growth threshold of 50.

“Even with a slight recent rebound in prices, farm commodity prices are down by 7.3% over the last 12 months,” Ernie Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business, said in the report released late last week. “As a result, and despite the initiation of $16 billion in USDA farm support payments, only 3% of bankers reported positive economic growth.” 

In Iowa, the June index increased to 39.4, from 8.2 in May. The state’s farmland-price index grew to 48.3, up nearly 12 points from May, and Iowa’s new-hiring index in June climbed above neutral growth to 51.9, up from 19.4 in May, the report showed.

Compared with a year ago, jobs in rural areas of the state were down 10.9%, the survey showed.

“We are closely monitoring the conditions in the ag sector to be sure we are adequately funded in our loan loss reserve,” James Brown, CEO of Hardin County Savings Bank in Eldora, said in the report.

The survey, created in 2005 by Goss and Bill McQuillan, former chairman of the Independent Community Banks of America, is a snapshot of the economy in approximately 200 rural communities with average populations of about 1,300 in 10 states that are dependent on agriculture and energy.

Other findings in the June survey include:

• The overall index advanced to a weak level. More than three-fourths of bank CEOs reported an economic downturn in their local area.
• Almost one-third of bankers with local ethanol plants reported current production shutdowns, either permanent or temporary.
• Approximately 33.5% of bankers expect low commodity prices to be the greatest economic challenge over the next 12 months for their Rural Mainstreet bank.
• More than one-fourth, or 27.3%, of bankers indicated that rising loan defaults represented the biggest challenge for their banks for the next 12 months.