In September, the Federal Reserve lowered interest rates for the first time in four years. The move brought the prime rate from 8.5 percent to 8 percent. Wisconsin Bankers Association Agricultural Banking Section Chair Jeff Wilke says the change won’t likely play a role in stimulating the ag economy.
“Whether or not rates are at one level or another, it still depends on what the farm needs to update capital assets and where that’s going to impact their debt,” he says.
Wilke says commodity prices are the largest influencers on lending decisions today. It’s a more positive story for dairy farmers since milk prices improved for the second half of the year.
“I think until the (milk) supply side of things ticks up a little more, we’re going to continue to see decent prices there,” he says. “That will lead to those dairy producers looking at what they can do on the farm to update equipment or to make things more efficient. I do think that will spark more investment.”
On the grain side, Wilke says his farm customers are focused on how to break even this year. He expects less activity for loans. Working with your accountant, banker, and agronomist to become more efficient is key as we end the year, he says. Wilke tells us what adjustments you might want to make this year to save on tax liability.
“On the grain side, I don’t think they’re going to have to do a lot of prepaying for tax reasons just because of where their income is going to be,” he says. “On the dairy side, that could be a little different with milk prices rebounding… looking at maybe doing some prepaying to lock in some discounts and at the same time be able to use it as a tool for reducing that tax liability might certainly make sense.”
