Despite high commodity prices pointing toward optimistic profit potential, higher interest rates temper the celebration. Interest rates on farm loans to farmers are 3.5 to 4.5% higher this spring than in 2021. In the Ag Finance Update report published by the Kansas City Fed, average interest rates are the highest since 2007.

The majority (75%) of the new loans in FY23’s first quarter hold an interest rate above 7%. For perspective, more than half of loans had interest rates below 5% from 2011 to 2020. The Fed has raised rates nine times since March 2022 to calm inflation. This effort has been successful. The U.S. inflation rate has dropped to 5% after topping a whopping 9% last June.

Read more on farm loan interest rates and inflation here.