Low-Interest Rates Illuminate Bright Spot for Agriculture

NORTH PLATTE, NE – With all of the negative news in the economy this year, Dr. Brent Gloy with Agricultural Economic Insights is focusing on a positive story for agriculture in 2020: low-interest rates.

What do the lowest interest rates in many producer’s lifetimes mean for the ag industry? Gloy explains that these rates provide some relief to cash flow budgets “but given that interest rates were already low at the start of the year, one has to think that the magnitude of the benefit is modest for many farms.”

Even so, Gloy says, the low-interest rates offer an opportunity to refinance and fix rates at levels that have not been seen in the past. In the bigger picture, the low intermediate and long-term rates provide some support to capital expenditure budgets, which make it cheaper to purchase equipment and other depreciable assets.

The major downward trend in long-term interest rates has definitely provided support to the farmland market. When rates start at such low levels and inch even lower, they have a dramatic impact on the present value of cash flows from long-lived assets such as farmland.
(SOURCE: Agricultural Economic Insights)