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GreenStone talks interest rates & cost impacts

An ag lender says he’s preparing for substantial margin compression as commodity prices soften and interest rates rise.

Paul Anderson, executive vice president and chief credit officer with GreenStone Farm Credit Services, describes credit quality among their members as excellent.

“Balance sheets are very healthy,” he shares.

But Anderson tells Brownfield projections by USDA and other entities have him concerned a significant change could be coming.

“That net farm income for the next several years is going to fall into the range of $80-100 billion, versus the current level of $148 billion,” he says.

He says double-digit farmland value increases from the past year are also likely to be short-lived.

“With interest rates rising and now profit margins compressing, we’re looking at land values to likely reduce and go back to low single-digit increases, and over the next couple of years potentially regress a little bit,” he says.

Anderson encourages farmers to lock in revenues as market volatility impacts both sides of their budget.

Brownfield interviewed Anderson during the Michigan Ag Credit Conference in East Lansing.