September 21, 2023
Mike Pearson gives us a glimpse into how interest rates are impacting the farm economy.
The Federal Reserve has increased interest rates 11 times since March 2022. This has caused higher costs for agriculture producers.
The latest increase in the interest rates came at the end of July when it was increased another quarter of a percent bringing the interest rate to between 5 1/4 to 5 1/2 percent. The federal reserve has already said to expect one more increase by the end of the year.
This leaves consumers-- and farmers-- paying between 7-9 percent for debt and it's leaving a negative impact.
However, not all farm borrowers get hit the same.
The top 20 percent of farmers making the most profit since the increase in interest rates actually saw a debt decline. This also meant less debt per acre.
The bottom 20 percent of farmers seeing the least profit actually gained a 40 percent increase in the debt per acre. It went from $1,683 per acre to $2,526 per acre.
However, the amount of the crop farmers will need to cover the interest rate increase will actually be less this year than in previous years because of crop prices.
Farm Progress America is a daily look at key issues in agriculture. It is produced and presented by Mike Pearson, a farm broadcaster and host of This Week in Agribusiness.
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