Middle East Conflict Could Push Interest Rates Higher

An agricultural economist warns that ongoing conflict in the Middle East could put added financial pressure on U.S. farmers in the coming year.

Purdue University’s Michael Langemeier said the uncertainty tied to the situation may contribute to rising inflation, which could prompt interest rates to increase.  Nearly 40% of producers surveyed in the latest Ag Economy Barometer expect inflation to exceed 3%.  While not all input costs are expected to rise, Langemeier notes that expenses directly linked to global instability, such as fuel and fertilizer, are the primary concern.

At the same time, higher interest rates would increase the cost of borrowing for operating loans and equipment purchases.  This combination of elevated input costs and more expensive financing, he noted, could significantly tighten farm profit margins.

Lenders may also become more cautious, adding further strain. The outlook depends largely on whether inflation persists or broader economic conditions begin to slow in the months ahead.

If you have a story idea for the PNW Ag Network, call (509) 547-1618, or e-mail glenn.vaagen@townsquaremedia.com