BrownfieldAgNews reports:
The chief economist at Farmer Mac says there should be immediate relief for production credits when the Federal Reserve lowers interest rates.
Jackson Takach says the cost of production credits should decline 1:1.
“We see over the course of the next 24 months there’s an expectation of almost 200 basis points of cuts in short-term interest rates.”
He says that’s good news for agriculture, because the average interest rate on the farm has increased considerably in the last two years.
“The Federal Reserve has been in a tightening cycle trying to address some of the concerns about inflation, excess GDP growth and economic growth. That’s led to a direct impact on farming and ranching operations as operating costs have increased dramatically with higher interest rate environments.”
Takach says the lower interest rates could start showing up in the upcoming loan renewal season for operating debt.
“That’s (also) going to take a few more years and it will go lower and lower as interest rates come back down.”
Takach says he’s expecting more real estate, machinery and operating debt as agriculture transitions out of a high-income environment.
The Federal Reserve is meeting today and Wednesday to discuss interest rate adjustments.
