Expect Higher Interest Rates for the Next Several Years

Farm profitability will be checked by the highest interest rates seen in years, according to Farmdoc daily. U.S. farmers should expect higher rates for the next several years as part of the Fed’s efforts to curb inflation. However, continued high commodity prices should mean the higher rates will present severe issues to only a small number of growers. The Fed raised rates repeatedly in 2022, bolstering an annual inflation rate of 7.1%. They aim to limit inflation to 2% annually over the long run.

Currently, USDA’s 10-year agricultural baseline assumes a bank prime rate of 6.6% and is how banks charge their most creditworthy customers. While higher interest rates generally lead to lower asset values, farmers are still sitting on robust farmland values – an asset not likely to decline in 2023.

Read more on interest rates here.