Low interest rates could help farmers

Aug 05, 2020

The Bank of Canada’s historically low interest rate gives producers an opportunity for financing

Staff Writer

Farms.com

As Canada continues to chart its new normal during the COVID-19 pandemic, farmers may be able to take advantage of the low interest rates.

“The Bank of Canada and other central banks in the world have lowered their interest rates to zero or even, in some countries, below zero. In Canada, it's at 0.25 per cent. So, it's practically zero and the reason the (Bank of Canada) did that is to stimulate the economy. (The Bank of Canada) put the interest rates very low so that people borrow and invest in the economy in an effort to stimulate it,” said Sébastien Pouliot. He’s a principal agricultural economist with Farm Credit Canada.

As a result, mortgages with variable interest rates are very low right now. If your interest rate is coming up for renewal, you could see a great rate, said Pouliot.

But while the cost of borrowing money is low right now, not all sectors of ag are in a good space to go this route, said Pouliot.

“If you think of hogs right now, margins are pretty tight. So, the risk of borrowing money in hogs right now is a little bit high,” Pouliot told Farms.com.

Overall, however, if you can cashflow the acquisition of farmland, equipment or a new mortgage, now may be a good time, said Pouliot.

The Bank of Canada “expects to keep its interest rate very low at that 0.25 per cent level for the next two or three years,” he said. “It will depend on how fast the economy recovers, but we're two to three years probably before the economy really starts going back up and recovers from the shock in March and April.”

Puttachat Kumkrong/iStock/Getty Images Plus photo

Video: Evolution of Beef Cattle Farming

The Clear Conversations podcast took to the road for a special episode recorded in Nashville during CattleCon, bringing listeners straight into the heart of the cattle industry. Host Tracy Sellers welcomed rancher Steve Wooten of Beatty Canyon Ranch in Colorado for a wide-ranging discussion that blended family history and sustainability, particularly as it relates to the future of beef production.

Sustainability emerged as a central theme of the conversation, a word that Wooten acknowledges can mean very different things depending on who you ask. For him, sustainability starts with the soil. Healthy soil produces healthy grass, which supports efficient cattle capable of producing year after year with minimal external inputs. It’s an approach that equally considers vegetation, animal efficiency, and long-term profitability.

That philosophy aligned naturally with Wooten’s involvement in the U.S. Roundtable for Sustainable Beef, where he served as a representative for the Colorado Cattlemen’s Association. The roundtable brings together the entire beef supply chain—from producers to retailers—along with universities, NGOs, and allied industries. Its goal is not regulation, Wooten emphasized, but collaboration, shared learning, and continuous improvement.