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Lender encouraged by smaller interest rate increase

An ag lender is encouraged by how small the latest Federal Reserve rate hike is.

Chris Lotzer with Ag Country Farm Credit Services in Marshfield, Wisconsin tells Brownfield he’s hopeful Wednesday’s quarter-percent increase to 4 ¾ percent is a sign of rates leveling off. “A quarter of a percent is a lot better than seeing these three-quarters of a percent rate hikes that we’ve had over some of those last Fed meetings.”

Lotzer says many farmers are in good financial shape and won’t need the higher-interest operating loans as soon. “I expect we’ll see some more people drawing on operating loans. First, they’ll use up any cash reserves they have, but I would expect, yes, those will be used where over the last year or two we’ve seen less use of them.”

Lotzer says lenders worked with many farmers to put old debt in long-term fixed low-interest rates during the pandemic, which led farmers to a different payoff strategy. “The thing was always pay off old debt. A lot of them are paying off any of the new stuff because that’s the most at-risk, so we’ve had people kind of use variable rates because those have been cheaper but as rates go up, those are obviously the ones that have been raising.”

Lotzer says the Federal Reserve is likely to make one or two more rate hikes, and he’s hoping for some relief in 2024. For his farm clients, Lotzer says the Farm Credit system utilized the bond market a lot, and that market has allowed them to offer many customers lower interest rates.