Rising expenses, high interest rates spurring pessimism

High interest rates, weakened agriculture commodity prices and rising grain storage expenses sparked a rise in pessimism this month, according to Creighton University's monthly survey of bank CEOs in rural areas of a 10-state region. .The Rural Mainstreet Index remained below the growth-neutral score of 50 for the ninth straight month, decreasing to 44.2 from 45.8 in April, after more than four straight years of being above the mark. Rural bankers remain pessimistic about economic growth for the next six months, with the confidence index falling to 28.8 from 37.5 in April. .According to the U.S. Department of Agriculture, farm cash receipts are expected to drop 4.2 percent or $21.2 billion this year. Total crop receipts are projected to fall 6.3 percent or $16.7 billion following lower receipts for soybeans and corn. Total animal/animal product receipts are expected to drop by nearly 2 percent or $4.6 billion to $239.8 billion amid falling receipts for cattle/calves, milk, eggs and turkeys. ."Weak agriculture commodity prices and farm exports combined with downturns in farm equipment sales over the past several months continued to constrain banker confidence," said Ernie Goss, chair in regional economics at Creighton University's Heider College of Business. .The index for farm equipment sales fell below 50 for the 11th time in the past 12 months, to 34 from 47.7 in April, as bankers reported higher borrowing costs, weaker grain prices and tighter credit conditions. Regional exports of agriculture goods and livestock have fallen 9.5 percent so far this year on an annualized basis. .The index for regional farmland prices fell to 47.9 from 56.5 in April. The vast majority of bankers said farmland prices have not increased from previous months. Bankers reported an 8.6 percent average interest rate on farm operating loans and 7.4 percent rate on farmland loans. "For the first time in more than four years, Creighton's survey is detecting weakening farmland price growth," Goss said. .Other report findings included:.The loan volume index fell to 82 from April's record high of 85.4. The checking deposit index dropped to 44 from 52.2 in April, while the index for certificates of deposits and other savings instruments fell to a still-strong 62 from 71.7 in April. The index for new hiring fell to 50 from 56.8 in April as few bankers reported a rise in hiring.Home sales and retail sales indexes fell below growth-neutral for the seventh straight month amid persistently high mortgage rates and a limited housing supply. May's home sales index increased to 46 from 34.8 in April, while the retail-sales index increased to 46.1 from 41.3.