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Preparing for higher interest rates

A financial management specialist says as interest rates rise, a balance between short and long-term borrowing costs becomes more important.

Bill Moore is vice president of treasury and capital management with Minnesota-based AgStar Financial Services.

“The more you can fix your rates and still manage your business appropriately, the easier it will be to project your future expenses and manage your business based on those future expenses.  To the extent that you have variable costs built into that.”

He says farmers can offset interest rate hikes by generating additional revenue.

“I think we are highly likely to see short-term rates move higher over the next 18 months.  The path of that could be slow or quick, it’s really hard to gauge.  So when you want to look at billing out your budgets for the future, you want to be comfortable in the position that you’re in.”

Moore says higher interest rates could also negatively impact producers by strengthening the U.S. dollar, therefore hurting ag exports.