Economist: Rural economy softening, but not like 1980s
Creighton University’s Rural Mainstreet Index shows economic conditions are certainly tightening across America’s Heartland.
But the downturn so far has not reached anywhere near what was experienced during the infamous 1980s farm crisis, according to Ernie Goss, chair in regional economics at Creighton’s Heider College of Business.
“Farmers have been very judicious in paying back their loans and getting loans. And bankers have been judicious about lending,” Goss told DeLoss Jahnke of the RFD Radio Network. “So, right now, the delinquency rates are not that high.
“Now, (delinquency rates) are up, but not as high as I would’ve expected,” he said. “This is not a return of the 1980s (when there was double-digit interest rates and an alarming rate of farm foreclosures).”
The Federal Reserve Bank of Chicago reported the index of repayment rates on non-real estate farm loans declined in the first quarter compared to last year. It was the sixth consecutive quarterly decline.
But farmland values in the Chicago Fed’s district increased another 1% last quarter compared to the previous year. Meanwhile, average cash rental rates for 2025 dipped 2% in the Chicago Fed’s district, which marked the first decline since 2020 as commodity prices remain under pressure.
In fact, a majority of bank CEOs (68%) surveyed in 10 states, including Illinois, for Creighton’s Rural Mainstreet Index named lower commodity prices as the No. 1 threat to ag and rural economies.
“The economic outlook for 2025 farm income remains weak, according to bank CEOs,” Goss said.
Overall, the Rural Mainstreet Index fell below growth neutral in May for the 20th time in the past 21 months.
Other key findings in the latest index from around the Midwest showed farmland prices sank below growth neutral for the 12th time in the past 13 months and farm equipment sales dropped below growth neutral for the 21st consecutive month.
Goss believes the current economic challenges make a strong case for the Federal Reserve to lower interest rates during its next meeting June 17-18. But he admits the likelihood of a move either way is probably a “coin flip” at this point.
“We need to see the Fed reduce interest rates,” Goss said. “I’d like to see a half-percentage point cut. That would be somewhat market-moving, and it would signal more reductions to come.
“I do think there’s more danger of a slowing and even recessionary economy rather than higher inflationary pressure,” Goss said of yet another reason he believes the Fed should reduce interest rates in the months ahead.
• This story was distributed through a cooperative project between Illinois Farm Bureau and the Illinois Press Association. For more food and farming news, visit FarmWeekNow.com.