Interest rates on the rise
Ag bankers are slowly raising the interest rate on loans to farmers and ranchers, with the largest increases seen on operating loans, says the Federal Reserve’s quarterly report on agricultural finances. The impact of higher rates on production costs is relatively small, equal to less than 1 bushel an acre for a Midwestern corn farm. “Additional increases in rates could put more pressure on some farm operations,” said the report, but the delinquency rate on farm loans remains low.
Lenders charged an average rate of 4.9% on operating loans this spring, a notable increase from 3.5% during the final quarter of 2015, when rates touched historical lows. Rates on other types of loans are rising at a slower pace.
“The increase in rates on operating loans, however, is more notable because these loans account for about 60% of the volume of non-real estate loans at commercial banks,”