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Survey: rising interest rates remain a concern for farmers

Seventy-two percent of farmers surveyed say it’s a bad time for large investments in their operations, according to the latest Purdue University/CME Group Ag Economy Barometer.

Jim Mintert, the principal investigator of the survey and director of the Purdue Center for Commercial Agriculture, says rising interest rates was the top concern among those producers.

“They’re concerned about it and starting to wonder how much impact that’s going to have going forward,” he says. “…I think the interest factor is going to be a bigger issue. Not only with respect to investments, but from a standpoint of managing their farms because the Federal Reserve raised rates after we conducted this survey, so we haven’t captured that impact yet. This group thinks that the quarter point rise that the Federal Reserve gave us in July probably isn’t the end of the rate increases and they’re worried about what that’s going to be with operating loans particularly as people look ahead to 2024. I think that’s going to continue to be a factor.”

The Farm Capital Investment Index saw some improvement by rising three points to a reading of 45. As a comparison, the index is up 14 points from November 2022 when it reached a low of 31 and is now 9 points above year-ago levels.

When comparing last fall’s responses to the latest survey, the percentage of producers saying it’s a good time for large investments has improved to 17 percent from 10 percent. The number of farmers who say it’s a bad time to invest fell to 72 percent compared to 79 percent in November.

He says there has been somewhat of a shift as less survey respondents say it’s a bad time for investments because of high prices for farm machinery and new construction.  

“This month, 39 percent of the people who thought it was a bad time to make a large investment said it was because of rising interest rates and only 29 percent chose the increase in prices,” he says. “If you go back to the first couple of times we asked this question, rising prices approached 50 percent. Back at that time in the summer of 2022, we had a range of about 14 to 18 percent of the folks that were choosing rising interest rates.”

Mintert says that will likely continue in the future with more farmers pointing to rising interest rates and fewer people pointing to higher prices for farm machinery and new construction.