Rising Interest Rates

Interest rates have been relatively flat over the past decade, but the Federal Reserve has increased rates several times this year to prevent the economy from over-heating. The cost to borrow money for land, machinery, or operating loans is likely to continue going up in 2019, which could put a tighter squeeze on already-slim profit margins. Now is a good time to meet with your banker or financial advisor.

Kevin McNew is the chief economist with Farmer’s Business Network. He says to analyze your current loans and determine strategies to lock in rates.

"I think the more you can lock in rates in a favorable situation, I think the more you should be doing that the next year," says McNew. "It does suggest a rising interest rate environment, we’re coming out of a long period of basically free money, cheap money, and the fed has made it clear that as long as this economy is humming along, we will continue to see interest rates rise."

Know your farm’s financial situation and which loan structure fits into that. McNew advises shopping around to find the best rates.

"Your traditional banker can be a good source to start from, but money is available from many different sources and it’s easy to determine what are those rates that are out there for you," he says. "So, in this environment, whether you’re shopping for chemicals for your farm or shopping money for your farm from the bank, there’s a lot of ways you can do that electronically."

Don’t make business decisions solely on interest rates. They’re just one factor in your overall operation expenses.

Learn more about farm loan interest rates and how to determine strategies for your farm