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HomeAg NewsMinneapolis Fed Says Interest Rates Hit Least-Profitable Producers Hardest

Minneapolis Fed Says Interest Rates Hit Least-Profitable Producers Hardest

The Minneapolis Federal Reserve took a look at interest rates and how they are affecting producers in recent months. Interest rates have risen dramatically since last year, raising the cost of borrowing money.

Ag producers in the Ninth District face additional expenses arising from supply issues and economic uncertainty. Interest rates have doubled since 2022 for agricultural producers after a decade of historically low and stable rates. The district’s least-profitable producers have higher debt per crop acre compared with the most profitable ones. As rates rapidly increase, cash flow projections for the least-profitable farmers are more sensitive to interest expenses.

Increased production expenses could require them to secure even more funding due to lower working capital levels per acre farmed. In most years, the least-profitable producers spend up to three times more on interest expenses per crop acre farmed. Elevated interest rates will continue impacting producers this year and beyond.

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