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What lower interest rates mean for ag

The Federal Reserve has lowered its benchmark interest rate by half a percentage point.

“It’s the first rate cut we’ve seen since March 2020.”

Ben Brown with University of Missouri Extension says the operating interest offered by ag lenders is expected to decline, too.

“That Federal Funds rate is a target. A lot of lending institutions are above that rate by a certain percentage; it’s how they make their money. It will take some time to work its way through the system, but this should start to put some relief on farm finances.”

He says the adjustment helps with liquidity.

“It makes borrowing cash or capital cheaper. For those with variable rate loans, it makes that debt service cheaper as well.”

Brown says in the last year there’s been a trend for farmers to choose loans with variable rates.

The Federal Reserve is expected to meet twice again before the end of the year and Brown says interest rates are expected to continue to move lower.