By Mary Hightower
While interest rates have declined from post-pandemic highs, higher input costs related to oil prices may add to farmers’ interest expense burden, said Ryan Loy, extension economist for the University of Arkansas Division of Agriculture.
The Federal Open Market Committee of the Federal Reserve met March 18, voting to keep the federal funds target rate unchanged at 3.50-3.75 percent. The Federal Reserve said it was still committed to “returning inflation to its 2 percent objective.” Only one of the 12 committee members voted to cut the rate.
“While benchmark rates have come down from post-pandemic highs, borrowing costs continue to remain elevated compared to the low-interest-rate environment before 2022,” Loy said. “For farmers across the country, this poses a significant challenge, as interest expenses remain a notable portion of crop budgets while trying to balance the drastic increase in operating expenses.”
As operating expenses increase, farmers need to take out larger loans, Loy explained. Those larger loans result in higher interest expenses.
Looking at the first quarters in 2023, 2024, 2025 and this year, “estimated interest expenses for 2026 are down marginally compared to the peak rate of 2024,” Loy said.
Compared to 2026, operating costs in 2024 would have generated about $4.26, $4.95, $4.58, and $2.74 more interest expenses per acre for corn, cotton, rice, and soybeans, respectively, Loy said.
Source : uada.edu