Here’s an update on economic factors impacting your farm finances as the end of October nears.

Natzke dave
Editor / Progressive Dairy

Interest rates impacting borrowers, lenders

Nearly two years of increases in farm loan interest rates have put considerable upward pressure on financing costs. As a result, farm lending activity at commercial banks slowed further in the third quarter of 2023, based on research from staff economists with the Federal Reserve Bank of Kansas City.

Average interest rates on all types of farm loans have increased for seven consecutive quarters and reached the highest level since 2007. Considerably higher financing costs have likely prompted borrowers with ample liquidity to limit debt usage, according to economists Nate Kauffman and Ty Kreitman.

One trend in ag financing relates to size: Lending slowed at larger lenders, while increasing among smaller lenders. That change across bank size was in contrast to recent years and coincided with fewer large loans, which are more typical at bigger banks.

Will interest rates continue to rise? The next meeting of the Federal Reserve Board’s Federal Open Market Committee (FOMC) is scheduled for Oct. 31-Nov. 1. The final meeting for 2023 is Dec. 12-13.


Read: Weekly Digest: Ag loan interest rates continue to rise

‘Distressed’ loan assistance deadline is nearing

Farm loan borrowers who took extraordinary measures to avoid delinquency, missed a recent loan installment or are unable to make their next installment have until Dec. 31, 2023, to apply for financial assistance through the USDA. Funding, approved in the 2022 Inflation Reduction Act (IRA), provided $3.1 billion for the USDA to offer relief for distressed borrowers with certain Farm Service Agency (FSA) direct and guaranteed loans.

Read: Assistance for distressed farm loan borrowers

USDA earmarks funds for exports, food aid

The USDA will provide $2.3 billion to help U.S. agricultural producers maintain and develop export markets and buy U.S. commodities to bolster international food aid.

The outlay includes $1.3 billion for a Regional Agricultural Promotion Program (RAPP) to enable exporters to break into new markets and increase market share in growth markets. The remaining $1 billion will be used to purchase surplus ag commodities and work with the U.S. Agency for International Development (USAID) to ensure the commodities reach those most in need around the world.

The funding was requested last August by leaders of the Senate Ag Committee. Heads of the National Milk Producers Federation (NMPF) and U.S. Dairy Export Council (USDEC) expressed hope the funding expands dairy export opportunities.

NMPF’s outgoing CEO, Jim Mulhern, encouraged Congress to also deliver additional funding for the Market Access Program and Foreign Market Development Program in the development of the next farm bill.

Coming up

  • September’s USDA Dairy Margin Coverage (DMC) program margin and potential indemnity payments are calculated on Oct. 31.
  • October Federal Milk Marketing Order (FMMO) Class II, III and IV milk prices are announced on Nov. 1, followed by the release of FMMO uniform pricing and pooling data, Nov. 11-14.

In case you missed it

  • One final reminder: Oct. 30 is the deadline to sign up for the Milk Loss Program (MLP), which provides financial assistance to eligible dairy operations for milk that was dumped or removed without compensation from the commercial milk market during calendar years 2020, 2021 and 2022.

Read: Weekly Digest: Are you eligible for Milk Loss Program assistance? and Weekly Digest: Milk Loss Program’s frequently asked questions