{"id":56439,"date":"2025-01-29T22:58:10","date_gmt":"2025-01-29T22:58:10","guid":{"rendered":"https:\/\/peraltafinancing.com\/agriculture\/the-impact-of-federal-reserve-interest-hikes-on-your-farm\/"},"modified":"2025-01-29T22:58:10","modified_gmt":"2025-01-29T22:58:10","slug":"the-impact-of-federal-reserve-interest-hikes-on-your-farm","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=56439","title":{"rendered":"The Impact of Federal Reserve Interest Hikes on Your Farm"},"content":{"rendered":"<p> <br \/>\n<\/p>\n<div id=\"post-body-5499774945772377859\" itemprop=\"description articleBody\">\n<p>\n<span style=\"font-family: &quot;times new roman&quot; , serif; font-size: 12pt; line-height: 115%;\">The Federal Reserve\u2019s decision to increase interest<br \/>\nrates in December has raised questions in the farming sector. The feds have<br \/>\nannounced at least two new hikes in interest rates in 2017. Although farm level<br \/>\ninterest rates have been too low for a long time, low agricultural prices can\u2019t<br \/>\ncover for any operational expense increases. The clear majority of non-real<br \/>\nestate loans made to farmers carry floating interest rates which means the cost<br \/>\nof credit adjusts upward if rates increase.<\/span><\/p>\n<table align=\"center\" cellpadding=\"0\" cellspacing=\"0\" class=\"tr-caption-container\" style=\"margin-left: auto; margin-right: auto; text-align: center;\">\n<tbody>\n<tr>\n<td style=\"text-align: center;\"><a href=\"https:\/\/blogger.googleusercontent.com\/img\/b\/R29vZ2xl\/AVvXsEg5ELO7aTZQTO-G2DwwQ38Qz0I1Rkfz-VY4JEPotjXaw-trigHasl3FO_nn_tZue_2D8OWjYkEVM-mEyKXvfVG2ggaYSBj35My9JM366LNm1_xbrF9I3p5rRO_UMBLpTJIWOWFp4ZfDF3Y\/s1600\/MiguelBlog.JPG\" imageanchor=\"1\" style=\"margin-left: auto; margin-right: auto;\"><img decoding=\"async\" border=\"0\" src=\"https:\/\/blogger.googleusercontent.com\/img\/b\/R29vZ2xl\/AVvXsEg5ELO7aTZQTO-G2DwwQ38Qz0I1Rkfz-VY4JEPotjXaw-trigHasl3FO_nn_tZue_2D8OWjYkEVM-mEyKXvfVG2ggaYSBj35My9JM366LNm1_xbrF9I3p5rRO_UMBLpTJIWOWFp4ZfDF3Y\/s1600\/MiguelBlog.JPG\"\/><\/a><\/td>\n<\/tr>\n<tr>\n<td class=\"tr-caption\" style=\"text-align: center;\"><span style=\"font-family: &quot;calibri&quot; , sans-serif; font-size: 11pt;\">\u00a0A pie chart used to compare interest<br \/>\nexpense versus gross profit<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>\n<span style=\"font-family: &quot;times new roman&quot; , serif; font-size: 12pt; line-height: 115%;\">The FRB increases the interest rate when there are<br \/>\nsigns of a strengthening economy but often agriculture is countercyclical to<br \/>\nthe national economy. One thing for sure is that farmers need to observe<br \/>\ncertain signals to maintain financial efficiency. <\/span><\/p>\n<p><\/p>\n<div style=\"margin: 0in 0in 10pt;\">\n<span style=\"font-family: &quot;times new roman&quot; , serif; font-size: 12pt; line-height: 115%;\">Farmers need to monitor their interest expense ratio, the<br \/>\nrelation between interest expense and gross farm income, which may indicate too<br \/>\nmuch dependence in borrowed capital or high interest rate on existing debt. The<br \/>\nPenn State \u201c<a href=\"http:\/\/extension.psu.edu\/business\/farm\/courses\/farm-en-e-finance-and-production-education-for-pennsylvania-farm-businesses\">Farm$en$e<\/a>\u201d program recommends to maintain this ratio below 5%. An<br \/>\nInterest-Expense ratio higher than 10% indicates that the farm is spending too<br \/>\nmuch of its gross income paying interest on borrowed money. In this case a<br \/>\nbusiness or farm may want to look at ways to lower this expense, this can be<br \/>\naccomplished in a number of ways including: selling of assets to pay down<br \/>\noverall debt (negative ramification for this may include tax issues),<br \/>\nrefinancing some loans, and restructuring of debt. <\/span><\/div>\n<p>\n<span style=\"font-family: &quot;times new roman&quot; , serif; font-size: 12pt; line-height: 115%;\">Higher interest rates in a country increase the value of<br \/>\nthat country\u2019s currency relative to nations offering lower interest rates.<br \/>\nThese higher interest rates attract foreign investment and the value of the<br \/>\ndollar increases. A strong dollar makes our agricultural products less<br \/>\nattractive to foreign buyers. One example is the reduction of cheese shipments<br \/>\nto Europe due to the decline of the euro versus the dollar. <\/span><\/p>\n<p>\nIf there was one piece of advice to the agriculture industry, it would be to<br \/>\nsettle in. While you may want to secure a long-term loan or purchase more<br \/>\nequipment, you will want to limit your borrowing; only do so when necessary.<\/p>\n<p>Likewise, be sure to have a cash reserve on hand.<\/p>\n<p>With interest rates expected to further increase, you will want to ensure<br \/>\nyou\u2019re properly prepared for the effects no matter how many hikes and in what<br \/>\nmagnitude.\n<\/p>\n<\/div>\n\n","protected":false},"excerpt":{"rendered":"<p>The Federal Reserve\u2019s decision to increase interest rates in December has raised questions in the farming sector. The feds have announced at least two new hikes in interest rates in 2017. Although farm level interest rates have been too low for a long time, low agricultural prices can\u2019t cover for any operational expense increases. The [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":56440,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12026],"tags":[6021,11558,11185,4197,11290,2002],"dealstore":[],"offerexpiration":[],"class_list":["post-56439","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-agriculture","tag-farm","tag-federal","tag-hikes","tag-impact","tag-interest","tag-reserve"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.4 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The Impact of Federal Reserve Interest Hikes on Your Farm - Som2ny Network<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fivemor.com\/?p=56439\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Impact of Federal Reserve Interest Hikes on Your Farm - Som2ny Network\" \/>\n<meta property=\"og:description\" content=\"The Federal Reserve\u2019s decision to increase interest rates in December has raised questions in the farming sector. 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