Quarterly interest rates drop again in first quarter
Lender surveys from Chicago, Dallas, Kansas City and Minneapolis Federal Reserve districts reflected the pressures of a subdued agricultural economy as interest rates on agricultural loans declined for another straight quarter in the first three months of 2025. Rates this low were last seen in 2022-23.
According to lenders across the agricultural districts, agricultural interest rates dropped another quarter as the economy continued to pressure credit conditions. Weak crop prices and dry weather conditions are mostly to blame. One survey respondent in South Dakota noted in Minneapolis’ quarterly survey, “Caution has turned to concern among the farm community due to dry conditions and lower commodity prices.” A similar sentiment was stated in the survey results from Kansas City, “Deterioration in farm finances was most pronounced in areas more dependent on crop revenues, while strong cattle prices continued to support conditions in some parts of the region.”
The average variable interest rate across districts was 7.83%, and the average fixed interest rate was slightly greater at 7.93%, although rates ranged from district to district and by types of loan.
In reviewing quarterly lender surveys in predominantly agricultural districts, the average interest rates are as follows (Table 1):
- Chicago: Interest rates on variable-rate operating, intermediate and real estate loans all declined in the first quarter when compared to the previous quarter. The largest decline was recorded in intermediate loans with a 0.12% difference.
- Dallas: The average interest rates on both fixed- and variable-rate loans in all categories dipped from the last quarter, ranging from a 0.18% difference in variable-rate real estate loans to a 0.28% difference in fixed-rate intermediate loans.
- Kansas City: Interest rates on fixed and variable loans in all categories showed a decline in the first quarter. The smallest interest rate was variable-rate real estate loans at 7.37%.
- Minneapolis: Fixed-rate interest rates on operating loans fell 0.3% from fourth quarter of last year to first quarter of 2025, the largest decline across all categories for all agricultural districts.
FOMC maintains interest rates at May meeting
During the May meeting of the Federal Reserve Board’s Federal Open Market Committee (FOMC), the board voted to maintain interest rates at 4.25%-4.5%. This decision was reflective of recent indicators that suggest economic activity continues to expand at a strong pace despite swings in net exports. The committee also noted that the unemployment rate has stabilized to low levels, and the labor market conditions remain solid even as inflation remains elevated.
The next FOMC meeting is scheduled for June 17-18 and will include a Summary of Economic Projections. Later dates for 2025 meetings include July 29-30, Sept. 16-17, Oct. 28-29 and Dec. 9-10.
