The rising cost of credit is straining some US agricultural producers' liquidity and prompting them to look at reducing fertilizer or chemical use, or plant fewer seeds next spring.
CHICAGO, USA – Montana farmer Sarah Degn had big plans to invest the healthy profits she gleaned for her soybeans and wheat this year into upgrading her planter or buying a new storage bin.
Farmers repay these loans after harvest with cash from their crops before repeating the process. Often, farmers seek to secure loans by year-end or early January to take advantage of suppliers’ early-pay discounts and to ensure they won’t be caught short as global supplies of fertilizers and chemicals remain tight.
and caused cattle slaughter rates in Texas to soar. Fertilizer and fuel costs have risen, as have farmland prices and cash rents. Most farm operating loans tend to be variable, rather than fixed. Variable-rate financing carries lower rates than fixed-rate financing, but exposes borrowers to the risk of higher costs if rates go up.started raising short-term rates to quell surging inflation.
Rising fertilizer and chemical prices forced him to borrow more to cover those expenses, even as Farm Credit continued to increase costs each time the Fed hiked rates. Now, his interest rate is 7.35%, and he expects it could reach 8% by year’s end – a 142% increase in eight months.
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