Dr. Penson Feature
Higher interest rates and production costs are a central focus for farmers and ranchers right now as inflationary pressure is shrinking profit margins in an otherwise strong commodity market. Additional interest rate hikes are expected when the Federal Reserve Board meets in November and December as they try to reign in inflation while avoiding a recession. The OPEC announcement that they will cut oil production by two million barrels a day will make the Fed’s goal of achieving a two percent inflation target more difficult as gas prices will likely increase as a result. Two more 75 basis point hikes would increase the federal fund's target rate to 4.75 - 5.00 percent, levels not seen in over a decade. Higher interest rates reduce the amount of financing farmers are eligible to receive, and strain margins for those with variable rates. Farmers with fixed rates who have already secured the financing needed for 2023 will be the least affected, but will still need to keep a close eye on their balance sheets to ensure they have accounted for the higher cost of inputs.
Higher interest rates and production costs are a central focus for farmers and ranchers right now as inflationary pressure is shrinking profit margins in an otherwise strong commodity market. Additional interest rate hikes are expected when the Federal Reserve Board meets in November and December as they try to reign in inflation while avoiding a recession. Farmers with fixed rates who have already secured the financing needed for 2023 will be the least affected, but will still need to keep a close eye on their balance sheets to ensure they have accounted for the higher cost of inputs.
Dr. John B. Penson, Jr., Chief Economist
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