Plowing into Farm Interest Rate Data

5160142334_69a1c43d6e_m

by David A. Widmar

Interest rates have been a popular subject in the past few years. After years of record-low interest rates, the U.S. Federal Reserve has hinted at a policy trend of increasing rates for more than a year. Other than a small, single rate increase late in 2015, rates have mostly remained in a holding pattern. In contrast to the U.S., several other counties have lowered interest rates to negative levels in hopes of spurring their economies.

At the farm-level, interest rates have several implications. Interest rates impact farm expenses and are a key fundamental driver of farmland values. Given declining net farm income and tight margins, credit worthiness is also a consideration in agriculture today. All this led us to digging into the Kansas City Federal Reserve Bank’s data on farm loans and interest rates. Specifically, this week’s post look at the distribution of farm loan interest rates. Continue reading

A Farm Debt Repayment Problem? Not Yet.

by David Widmar

Given USDA’s current projections for net farm income, 32% lower than in 2014, its natural to wonder about producers’ financial ability to weather the current conditions. As profitability slips, or even turns negative, some producers may find it difficult to service their debt, creating financial hardships and sometimes even business failures. Difficulty servicing debt, mainly farmland debt, is what comes to mind when reflecting on the farm financial crisis of the 1980s.

This led us to wonder if farmers are currently struggling to repay their debt. For this, we took a look at the farm debt data posted in the Agricultural Finance Databook published by the Kansas City Federal Reserve. The Agricultural Financial Databook is a collection of survey work the Federal Reserve collects and is extremely valuable for monitoring the farm financial system.

Continue reading