High interest rates are eating into farmer’s bottom lines across the country. Tait Berg, senior agricultural coordinator for the Minneapolis Federal Reserve, says farmers in the Ninth District have seen interest rates double in the last couple of years.
“Since about early 2021, interest rates for ag producers have increased around 400 basis points, and what that equates to is four percent interest,” according to Berg. “To put it into perspective, in 2021, during renewal season, a lot of ag producers were getting around four-and-a-half to 4.6 percent interest rates for their production loans. Now, in 2023, they’re being charged about eight-and-a-half percent. That’s a pretty big increase over two years.”
It’s been several years since interest rates climbed this high according to Berg. “So we collect data from community banks within the ninth district, and we have data going back to about 2000-2001. And the last time it was at this high was around 2007. So, we’ve actually about 15-17 years.”
In putting the numbers together for a recent article, Berg found agricultural producers in the Fed’s district paid more than $800 million in interest expenses during 2023.
Berg said, “In 2023, interest expenses for ag production loans in the district totaled about $840 million. Now, to put that in comparison, in 2021, interest expenses for ag production loans were $415 million. And then, in 2022, the total interest expense paid was $490 million. So, that total interest paid in 2023 is more than double from 2021, so that’s a very large increase in two years.”
Article courtesy of the NAFB News Service
