Outlook for Agricultural Finance Markets

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Michael Gunderson, PhD Blaine Nelson Sue Aguilar
MAY 01, 2022

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Executive Summary

Agricultural real estate mortgage rates seem likely to rise as the Federal Reserve raises interest rates in an effort to combat elevated inflation. While higher commodity prices positively impact net farm incomes and land values, the rising agricultural interest rates may eclipse that boost and ultimately put agricultural land values under pressure. Additional interest expenses will add to production costs and raise breakeven production levels. USDA projects farm incomes to remain elevated this year, helping offset higher borrowing costs. Still, agricultural producers should use these potential new interest rate forecasts in their budgeting and land purchase calculations.