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Give interest rates a close look this winter

Work closely with your advisors and lenders to consider how rising interest rates will impact your farm business.

Darren Frye, CEO

December 5, 2022

2 Min Read
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There’s been a lot of talk about interest rates – not only the ag world, but the overall business world. Recent interest rate hikes and speculation that there may be more to come are creating new challenges that many businesses haven’t experienced for a while.

So what’s a farm leader to do about these interest rate hikes? What are some of the important factors to consider when it comes to how to navigate interest rate changes for your farm business? Here are a few things to think through.

What to check

Operating lines will be affected for next year as an additional expense due to higher interest, so that’s one thing to keep in mind if you have an operating note. If farm leaders are considering any major purchases that will involve financing, the higher amount of interest expense is also something to remember.

Also, it may have been more of a “no brainer” in the past to lock in interest rates on a long term note at 3.5-4%, but now it’s suddenly a bit trickier and more complicated when you’re looking at a 7% interest rate or higher.

It will be a good idea for farm leaders to take a closer look at any decisions that involve interest rates. Farmers will want to work closely with their advisors and lenders to determine what’s going to be the best route for their operation, using their operation’s financials and long-term goals to help guide the way.

Consider possibilities

This may mean spending more time and consideration on decisions involving interest rates than leaders may be used to in the past six years or so. Farmers and their advisors will need to be asking questions like: Should we consider doing something like using a variable rate that’s only locked in for 5 or 10 years and then is open to the market again, or lock in the full term?

What’s right for your farm operation when it comes to interest rates will depend on your unique operation and its goals and needs. All farm leaders need to spend additional time considering the impact that higher interest rates will have on their operation in 2023 and beyond – and that will look different for each farm business.

2023 market opportunities

Every single crop year in farming is different and will present new challenges. That can be exciting as a farm leader – and also can bring about some anxiety.

Are you thinking about 2023 marketing plans? Farmers have found that getting some third-party perspective from our market advisors has helped ease their minds. The advisors help farmer clients with planning and execution around marketing decisions and help keep them up to speed on the current rapidly-changing grain market situation – and how it impacts their operation.

Get a free two-week trial of our marketing information service (MarketView Basic). Your free trial includes regular audio and video updates, technical analysis, recommendations and more. Learn more about our market advisor programs and offerings at

About the Author(s)

Darren Frye

CEO, Water Street Solutions

Darren Frye grew up on an innovative, integrated Illinois farm. He began trading commodities in 1982 and started his first business in 1987, specializing in fertilizer distribution and crop consulting. In 1994 he started a consulting business, Water Street Solutions to help Midwest farmers become more successful through financial analysis, crop insurance, marketing consulting and legacy planning. The mission of Finance First is to get you to look at spreadsheets and see opportunity, to see your business for what it can be, and to help you build your agricultural legacy.

Visit Water Street Solutions

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