Farmers have a lot to be worried about right now.
Prices and farm incomes are in the tank. Ongoing international trade talks are affecting overseas markets. Congress is debating a Farm Bill that will determine growers’ ability to mitigate risk. Mother Nature is wreaking havoc across the country – with farmers in the Great Plains facing drought and southern growers getting pounded by rain.
Now, The Washington Post is reporting on yet another reason for farmers to fret.
“The Federal Reserve has signaled that it will probably raise its benchmark interest rate at least five more times by the end of 2019,” the newspaper reported on June 1. “As the Fed boosts rates, banks charge more for credit card debt, car loans and home mortgages. Farmers … could soon face rates of more than 7 percent.”
Shane Merrill, a 25-year-old South Dakota farmer interviewed by the paper, summed up the situation well.
“It’s one more burden for us at a time when our prices are half of what they were five years ago,” he said, noting that continued low prices and increasing rates could drive some growers out of business altogether.
Merrill grows corn, soybean, alfalfa, dairy and beef with his father and grandfather, Bob, who started the homestead in 1968 and has seen his fair share of ups and downs in agriculture since.
“Things are as hard as they’ve been for 20 years, maybe even since the 1980s,” Bob told the Post.
The paper reported that suicide rate among farmers has now eclipsed all other professions in America, according to the Centers for Disease Control and Prevention. And economic pressures are certainly a key reason.
Because of the high cost of farmland and equipment, farmers typically borrow more money every year than most Americans do in a lifetime – all in the hopes that a seed will sprout and grow into a crop that will deliver a fair price.
But when prices are down, it’s harder to repay lenders. And that’s leading to more and more loan defaults – a trend will likely continue as interest rates rise and eat away at what little margin is left.
Unfortunately, young farmers will be the most affected, the Post reports, because they lack the equity and borrowing history of older colleagues.
Another farmer interviewed for the story, a 42-year-old Wisconsin dairy farmer, described the helplessness.
“We are highly leveraged. My parents didn’t help me get started. We are at a lot more risk than a farm that’s been in the family for generations,” she said. “The only thing you can do is borrow more money. And many times, it ends up being those short-term loans with high rates.”
If rates get too high, the farmer says she’ll be forced to close up shop. And she’s probably not alone.
That’s the backdrop under which the current Farm Bill is being written, and is why the decisions made by lawmakers in the coming weeks will affect the lives of so many.
Put simply: Rural America needs a strong Farm Bill to help ease the worry.