Higher interest rates continue to impact farm management

An ag economist says education is key when it comes to the current lending environment. 

Matt Erickson, ag economic and policy advisor with Farm Credit Services of America says higher interest rates are forcing farmers to treat their operations more like a business.  “We had prime at 3.25%,” he says.  “Things were a little more easy to manage on the interest rate environment.  Now we’re at 8.25 to 8.5 percent.”

He tells Brownfield pencils are going to get really sharp in 2024 and beyond.  “Understand that cost of revenue structure,” he says.  “But more importantly understand what your break-even is.  I get asked all the time what is the overall breakeven for a commodity and it’s different for every operation because every operation is different.”

Erickson says a lot of commodities could see more margin compression this year. “Cattle prices are expected to be good,” he says.  “We have a tight supply environment right now.  But it goes back to the macro environment.  The consumer resiliency this year could be hindered by more restrictive monetary policy.”

He says farmers need to know their debt obligations, but also what that means on a per acre and/or per head basis.  

Brownfield interviewed Erickson at the 2024 Cattle Industry Convention. 

AUDIO: Matt Erickson, Farm Credit Services of America

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