Much like a domino effect, the down grade of the nation’s credit rating has trickled down to the farm credit system. Bob Young, Chief Economist for the American Farm Bureau Federation says that in the short-term, it might not mean much, but long term is a different story:
“So far the markets have reacted where people are flying to federal treasuries, buying them up, prices for those bonds have been up the past couple of days, or so, interest rates have actually been down. So, I’m not so sure that in the short term, this is going to be that big a deal, and federal paper is considered to be the safest paper out there. so, that being the case, you know, I’m not sure that things necessarily move.”
Gene Charville, President of AgCarolina Financial says that it’s business as usual within his institution:
“It’s important to farmers that we have a steady supply of funds available for them, and that supply has not been interrupted. We still have all the money we need available to lend at competitive rates.”
But, for those that might have some type of adjustable rate loan, Young suggests that getting a fixed interest rate might be smart:
“Well, I would almost suggest that if you have a variable rate, that might not be a bad idea that if you can switch it over and lock in a rate, that it may not be a bad idea to think about some of that and look at what rate they might offer to you for going to a fixed rate. Because, I do think the potential is out there for interest rates to move back up. I think we’ve got to watch what the Fed does here in the next few days or so in their meetings I’d be inclined to at least talk about that with my lender, kind of see what kind of deals they might be able to offer to me here in the short run because I think six months from now, 12 months from now we could be talking about some very different interest rates scenario than we’re talking about today.”
And charville says that in the big scheme of farming, with a slight increase in interest, it’s still a very small part of overall farming expense:
“In this period of economic uncertainty you could expect that rates could climb a little bit, but even with some escalation in rates, we still see that interest expense would remain relatively low from a historical perspective.”
Charville says that bond rates have risen slightly in the past couple of days:
“Even as recent as yesterday, bonds were issued at rates -- they only changed a few basis points from bonds that were issued a week ago.”
Gene Charville, President of AgCarolina Financial and American Farm Bureau Federation Chief Economist, Bob Young
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