Interest rates are low and should remain that way for the foreseeable future. Adam Rabinowitz, Assistant Professor and Extension Economist at Auburn University, says vegetable and specialty crop producers may have an opportunity to capitalize.
“Interest rates are extremely low, and they are forecast to remain low. That is certainly an opportunity to where if there’s interest on any kind of capital equipment or land, in terms of loans that have interest on that; looking at refinancing that is an option, if you can secure a lower rate,” Rabinowitz said.
“But also, it certainly might be an opportunity, if you have a sound financial position long term, to look at buying some of the equipment that is needed for where you’re going to have a loan that will obviously have a lower interest rate at this point.”
Interest Rate Background
The Federal Reserve Bank oversees setting the interest rate, which rises and falls depending on the outlook of the financial market.
The interest rate is typically high when economic times are good but is low during economic downturns. Such is the case amid the coronavirus pandemic, which led to massive shutdowns and a spike in unemployment when COVID-19 impacted the country in mid-March.
The interest rate is near zero percent and is expected to remain that way through 2022.
Proceed with Caution
But Rabinowitz also cautions farmers to really consider if taking on more debt is the right tactic to take with regards to their farming operations.
“I would stress, though, it’s important to look at it within the context of the entire operation to make sure the financial position is a sound financial position before taking on that additional debt. We’re still looking at very volatile markets in terms of pricing,” Rabinowitz said.
“There’s a lot of uncertainty in a lot of other aspects. Taking on more debt is not necessarily the best thing to do either.”