I was surprised at the difference in Creighton’s Rural Mainstreet Economy Indexes (RMI) between Minnesota (49.4) and Missouri (91) last month. 50 is growth so that means that the Minnesota rural economy is the first to slow to neutral while Missouri is still showing the rest of rural America how growth is done.

The 10-state Heartland RMI was 57.7, down from 62 the previous month. So, the larger story is that there is still strong but slowing growth in our 10-state region. South Dakota and Kansas joined Minnesota at the bottom of the RMI index list while Colorado and llinois were nearer Missouri at the top.

The new-hiring index fell in all of the states except Iowa where it rose from 62.1 to 69.8. The overall new hiring index and home and retail sales indexes were 61.5. Those numbers were declining, but still well into growth measured above 50.

The farmland index must have driven the strong RMI for Missouri at 86.4, the strongest of the 10 states. Kansas had the lowest farmland index of 69.4.

Economist Ernest Goss noted how exports to Mexico boosted the rural economies of these Midwest states. He said that exports from Missouri to Mexico represented 84.6 percent of that state’s commodity exports in 2021. Only 28.9 percent of Minnesota commodity exports went to Mexico last year.

57.2 percent of the 10-state farm commodity exports went to Mexico in 2021. Ironically without the Hispanic workforce in U.S. ag there would be less to export. H-2A applications were up 17 percent so far this year. And yet the commodity markets focus almost all on exports to China

The RMI report text noted that rural ag loan index rose to 73 from 66.9 the previous month, attributed to higher farm input costs. It will cost significantly more money to farm this year. Diesel fuel has doubled some places. The Creighton survey of rural bankers say that cash rents have climbed 9.6 percent.

40 percent of bankers say that they expect farm incomes to be higher, offset by 25.9 percent who think that they will be lower. That is likely split by who is under major drought and where crops are getting in on time. Commodity prices have risen enough to cover costs if there is good production. Farmers need bushels to sell or price is meaningless.

CNBC said that U.S. consumer bank deposits were up 8 percent year over year in May. I guess that means that they have the 8 percent inflation covered.

I noted in Commstock’s Brazil update that Brazil’s inflation rate was 12 percent and their interest rate was 12.75 percent. It usually takes an interest rate higher than inflation to quell inflation. That way it pulls cash into securities instead of inflating assets. That is what it took in the 1980s to kill inflation. We are a long way from that yet here and now. An interest rate higher than 8 percent inflation would crash our economy and bankrupt the federal government. The good news is that inflation has not dug into investor or consumer mindsets yet. They hope to kill it before that it does. Former Clinton Treasury Secretary and economist Larry Summers says that we have never had unemployment this low and inflation this high without having a recession. He was right about his forecast that the Fed was missing inflation and that it was not transitory. He was passed over for the Fed. I also googled the top US economists and he was not on the list. He must have ticked someone off.

CNBC Jim Cramer says that until the “market” gets its collective mind around global geopolitical tensions and inflation it will not be able to mount a “meaningful” comeback.

When I say that we are not in the inflation mindset, here is what I mean by that. A small business says that buyers are responding to higher prices by buying a half load instead of a full load. They are buying less because of high prices. That doesn’t mean that they are consuming less. In an inflation mindset they would buy 1 1/2 loads instead of a load to build an inventory thinking that waiting to buy will only cost them more money in the future. This effort to avoid higher prices actually pulls demand forward inflating prices so is self-fulfilling.

Small business has become pessimistic over economic prospects for the next year. A WSJ survey says that 57 percent expect economic conditions to deteriorate. Good thing that this decline started from the top of the mountain and not halfway down. Employment is still strong and while interest rates are off the bottom they are not “high” yet by historical measurement. Many small businesses view this full employment as a negative thing as they cannot hire new workers, worker quality has deteriorated, and wage costs have gone up with inflation.

88 percent of small businesses say that hiring challenges have gotten worse since January. Hardee’s got my order wrong two times so I went to A&W who proceeded to get my order wrong twice as well so nothing changed. I asked for a hamburger with no cheese, had them repeat the order back to me and still got cheeseburgers every time. They must have made a deal with the dairy industry. My take is that the fast-food industry is scraping the bottom of the barrel. If prospective employees can fog up a mirror they get hired. McDonalds is probably the best at getting the order right but I have gotten cheeseburgers when ordering a hamburger there too.

I returned some unused fence lumber to the local merchant and they had a young kid come out to count the slats. He looked, thought that there were too many and then marked my paper with no pretense of having actually counted them. The guy in the lumber shed helping me unload was 65 years old and he asked me whether the first employee or the gate guard had counted them. I told him “no”… neither had. He said that they can’t get anyone to work anymore. If you fire them, they can get a job elsewhere and the one you hire to replace them, if you can, is no better. Us two old guys unloaded the lumber and bonded. He said that he no longer eats at fast food restaurants anymore because he knows the quality of the employees preparing the food. He has a point.