SALEM, Ohio — The perfect storm of economics is giving many farmers opportunities they might not have seen coming.
Mark Hancock, vice president and treasurer of Farm Credit Services, said the down economy has created low rates for borrowing, but unfortunately shows a sign of general weakness in the economy.
On the up side, the economy has provided for grain farmers very well. They are getting high prices because of exports and ethanol production. Those high prices, and current low interest rates, create a great opportunity for farmers to borrow, meaning opportunities to replace equipment that has worn out or to add land to their portfolio.
“Many farmers are reinvesting in equipment and additional land purchases due to the really low interest rates, and who could blame them?” Hancock said. Cash may be one of the lowest priced inputs available to farmers right now.
He said there is a demand for new loans and refinancing of current loans due to the low interest rates.
Hancock said the people at Farm Credit Services do not consider themselves financial advisers, but do try to give some customers some strategies when it comes to finances and the farm.
“Cash may be one of the lowest priced inputs available to farmers right now Hancock said .
“Farmers are very conservative in their investments and have always been conservative with their money” said Hancock.
“Depending on the situation, we may urge the customer to use more cash on more strategic purchases to yield better returns in the end,” he explained.
Hancock said the Federal Reserve gave explicit guidance on the short-term loans rates, which will last through the August session in 2013.
He said it is one thing many can look to if they are looking for any type of certainty, bad or good, in this economy. He said it means the Federal Reserve is trying to give some certainty to borrowers in a very volatile market. He believes it is the first time in history that the Federal Reserve has came out and discussed short-term loans explicitly.
The interest rates for long-term loans are also remaining low, but there is nothing out of the Federal Reserve as to how long they will remain low.
Farm Service Agency
Another idea farmers may want to consider is visiting their Farm Service Agency. In fact, farmers are reminded they might want to consider a farm storage facility loan or a commodity loan, now that that harvest is here.
According to a release from Luke Fritz, executive director for the Butler/Beaver/Allegheny County FSA, the farm storage facility loan (FSFL) program provides loans to build grain bins, silos, fruit and vegetable cold storage and hay storage structures.
The FSA is reminding farmers that there is still time to construct a grain bin, replace a dryer or build a hay storage facility this fall.
For storage facility loan applications approved in October, the interest rate is 1.150 percent for seven years.
Commodity loans are also available and can be used to provide capital, provide a better opportunity for grain marketing and capitalize on discounts for inputs offered in the winter.
Eligible harvested commodities are corn, soybeans, wheat oats and barley.
The current interest rate for a nine-month commodity loan disbursed in October is 1.125 percent. Commodity loans are normally completed within five working days of the request.