From the Fed to the Farm: A Look at Farm Interest Rates
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.