Higher interest rates complicate life for many farmers

Spring wheat was harvested in Kentucky to make way for a soybean crop. (Photo by Amrira Karaoud, Reuters)

The short-term, variable-rate loans that most American farmers take out after fall harvest and before spring planting "to pay for everything from seeds and fertilizer to livestock and machinery" now carry higher interest rates, and "Producers are wrestling with how to pay for that debt," Reuters reports.

P. J. Huffstutter and Bianca Flowers interviewed 24 farmers and bankers and reviewed data from the U.S. Department of Agriculture and the Federal Reserve Bank of Kansas City. They found that some farmers are having to defer capital improvements because of higher interest rates.

"Montana farmer Sarah Degn had big plans to invest the healthy profits she gleaned for her soybeans and wheat this year into upgrading her planter or buying a new storage bin," they report. "Those plans have gone by the wayside. Everything Degn needs to farm is more expensive."

Some farmers try to get loans by the end of the year or early January "to take advantage of suppliers' early-pay discounts and to ensure they won't be caught short as global supplies of fertilizers and chemicals remain tight," Huffstutter and Flowers write. "This rising cost of credit is straining some producers' liquidity and prompting them to look at reducing fertilizer or chemical use, or plant fewer seeds next spring. That, in turn, could reduce crop yields, and place upward pressure on the cost of producing that food."