Here’s an update on interest rates from quarter two of 2024 as reported by Federal Reserve districts that share data impacting dairy finances.
Ag loan interest rates float around 8.5%
Quarterly lender surveys from Chicago, Dallas and Kansas City Federal Reserve districts reveal interest rates on most agricultural loans decreased slightly during the second quarter of 2024, with the average of all rates at 8.5% although in some cases reaching higher than 9%.
According to lenders, demand for agricultural loans increased in quarter two despite interest rates hovering at multidecade highs. Experts anticipate the greater lending volumes and elevated interest rates may be taxing for those highly leveraged borrowers.
Reviewing quarterly lender surveys in predominantly agricultural districts, average interest rates included (Table 1):
- Chicago: Interest rates on variable-rate intermediate and real estate loans were down 0.05% and 0.02%, respectively, while variable-rate operating loans were up 0.03% from the previous quarter.
- Dallas: Average interest rates on both variable- and fixed-rate loans in all categories ticked downward in the second quarter. Variable-rate intermediate posted the largest decrease at 0.21%.
- Kansas City: Districtwide, average interest rates on variable- and fixed-rate loans remained largely unchanged from quarter one, with rates dropping anywhere from 0.01%-0.03%.
The Federal Reserve Bank of Minneapolis’ quarterly survey of agricultural credit conditions in the second quarter of 2024 were not available at the time of this writing. However, first-quarter data was released since the last time Progressive Dairy reported on quarterly interest rates. (Read: Elevated interest rates impact dairy farm finances)
Falling incomes in quarter one led to an increased demand for loans regardless of the elevated interest rates for much of 2023. More than half of bankers in the 9th District reported greater demand for loans in the first quarter compared to the same time a year ago, according to the survey. Fortunately, quarter one interest rates ticked down slightly for both fixed and variable categories.
- Minneapolis: Except for variable machinery loans, all fixed and variable loan categories slipped faintly from fourth quarter of 2023. Variable machinery loans increased 0.1% in quarter one of 2024, while fixed operating loans had the largest notch downward at 0.2% to 8.6% relative to 8.8% a quarter prior.
Other influencing factors
The Federal Reserve Board maintained interest rates at 5.25%-5.5% at its last meeting in July. The next meeting of the Federal Reserve Board’s Federal Open Market Committee (FOMC) is set for Sept. 17-18, where it is highly anticipated that the board will cut interest rates based on current economic conditions. Remaining meetings in 2024 are: Nov. 6-7 and Dec. 17-18.
On Sept. 3, the USDA Farm Service Agency (FSA) released lending rates for the month. The rates were decreased for the second month in a row. (Read: Economic Update: U.S. exporters secure rights to use common food names in Chilean market)
