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An expensive time to borrow

Rising interest rates and the increased cost of capital means farmers may have to take a different approach to 2024 production expenses.

Aimpoint Research Chief Economist Gregg Doud says it’s unclear what next year will bring for a capital-intensive industry like agriculture.

“Are we going to have economic growth, which means we’re going to have improved commodity prices and we can offset the higher costs of interests and operating capital, or not?”

He says it’s a difficult question to answer, but the Federal Reserve is trying to figure it out. Nate Kauffman with the Federal Reserve Bank of Kansas City says lower commodity prices and input costs indicate inflationary pressures are softening.

“However, there are still some pain points that came out a number of times in recognition of the global market for agriculture being strong and a lot of demand as we look further out.”

He says it’s unclear what will happen with future interest rates. Chris Olson with Rabobank says that’s why farmers will need to manage through these volatile times.

“Farm financial health is strong right now and that cash is being held onto to help make management decisions that may not require as much capital, which ultimately reduces the total cost in your operation.”

And If producers need to borrow money, Olson says the timing will be crucial.

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