by David A. Widmar
A few weeks ago we evaluated fixed expenses to see if adjustments lower had occurred. Changes have been slow, but have started to emerge. Another second component of production costs are variable expenses. These are the expenses producers typically monitor very closely; fuel, fertilizer, and seed. This week we take a look at the USDA’s cost of production data and the Purdue crop budgets to evaluate where source of lower variable expense have occurred. Continue reading
By Brent Gloy
In our last post we discussed how the Olympic averaging process will almost certainly result in lower price guarantees for corn and soybeans in 2016. In this post we take a look at the county level yield and revenue guarantees. Continue reading
By Brent Gloy and David Widmar
There has been widespread speculation about whether the Federal Reserve will raise interest rates at the upcoming Federal Open Market Committee (FOMC) meeting. Regardless of whether they decide to raise rates or not, it certainly been some time since rates have risen. In fact, the Fed Funds rate has been held near zero since late 2008 when the financial crisis was in full swing. One has to go back even further, 2006, to observe the last time that the Fed raised the target rate. A long time indeed.
The impact of low interest rates on agriculture has been debated quite widely. We have argued for some time that low long-term interest rates have played a supporting, if not key, role in the dramatic rise in farm real estate values and we’ll provide some perspective on longer term rates in a subsequent post. While the Fed’s decision won’t necessarily impact long-term rates, any decision to increase rates may impact the shorter term borrowing rates faced by farmers. In honor of the Fed’s big decision we decided to take a look at historic farm interest rates and think about how changes in interest rates might impact the farm sector.