Well, they finally did it. The Federal Reserve raised rates by 25 bps to .25.
The way I see it Janet Yellen the Federal Reserve Chairperson was staring at a tale of two errors. Raise rates on worsening economic data or pass on the hike and destroy what little credibility you have left? Pick your poison. She picked her/their credibility.
We really had two events today. First was the actual move in interest rates - the first raise in nearly 10 years. The second was what would Janet Yellen say in her press conference.
What does that mean to us?
The dollar may get stronger as the Fed thinks the economy is moving healthily enough in the right direction that it needed to raise rates. That should strengthen the dollar and make us less competitive abroad. That doesn't help considering the CCI (Continuous Commodity Index) is off nearly 20% this year. That is a huge number. Oil has hurt but so has the demand for some of the precious metals food stuffs produced here in the U.S.
If the raise was too soon we might see the next move in interest rates back to 0%. That would send an extremely bad signal to the markets that the world's largest economy is slowing again. We are in the middle of an earnings recession and our manufacturing sector is also contracting. These are hardly the hallmarks of a healthy economy.
Obviously borrowing costs and prime rates will rise. This will have an impact on our loans and land prices.
The upside is that the Fed felt as though things were good enough to go ahead and pull the trigger. At least that is what they want you to believe. I think they did it to stay relevant, not for any economic strength purposes, and therein lies the danger.
Wrote by Scott Shellady, senior vice president of TJM Institutional Services LLC.
Rates and Farming
In the recent Mid-November Marketing issue of Successful Farming magazine, financial experts spelled out what an interest rate hike would mean to corn and soybean farmers.
Brent Gloy and David Widmar of Agricultural Economic Insights anticipate an increase of 100 basis points into 2016. For a cash grain farmer who finances $400 per acre of operating expenses, this increase would add $4 per acre in costs. Factoring in a 4% borrowing rate, the interest tab would increase from $16 to $20 per acre. This rise would also dampen the enthusiasm for agricultural equipment purchases.
“Our view is that interest rates aren’t likely to rise enough in the short term to cause large decreases in profitability,” says Gloy, a former Purdue University professor who farms in western Nebraska. “Overall, it’s not likely that interest rate increases on non-real estate loans will place a huge burden on producers in 2016. However, it adds another cost to the ledger at a time when significant cost reduction is required.”
Terry Jones of Executive Ag Network and a Williamsburg, Iowa, farmer agrees. “People have gotten very forgetful about higher interest rates and what impact an increase would have on their operating line of credit, their debt, and costs of production,” he says.
Wrote by Cheryl Tevis, Successful Farming magazine.
Well, they finally did it. The Federal Reserve raised rates by 25 bps to .25.The way I see it Janet Yellen the Federal Reserve Chairperson was staring at a tale of two errors. Raise rates on worsening economic data or pass on the hike and destroy what little credibility you have left? Pick your poison. She picked her/their credibility. We really had two events today. First was the actual move in interest rates - the first raise in nearly 10 years. The second was what would Janet Yellen say in her press conference. What does that mean to us?The dollar may get stronger as the Fed thinks the economy is moving healthily enough in the right direction that it needed to raise rates. That should strengthen the dollar and make us less competitive abroad. That doesn't help considering the CCI (Continuous Commodity Index) is off nearly 20% this year. That is a huge number. Oil has hurt but so has the demand for some of the precious metals food stuffs produced here in the U.S. If the raise was too soon we might see the next move in interest rates back to 0%. That would send an extremely bad signal to the markets that the world's largest economy is slowing again. We are in the middle of an earnings recession and our manufacturing sector is also contracting. These are hardly the hallmarks of a healthy economy. Obviously borrowing costs and prime rates will rise. This will have an impact on our loans and land prices.The upside is that the Fed felt as though things were good enough to go ahead and pull the trigger. At least that is what they want you to believe. I think they did it to stay relevant, not for any economic strength purposes, and therein lies the danger. Wrote by Scott Shellady, senior vice president of TJM Institutional Services LLC.Rates and Farming In the recent Mid-November Marketing issue of Successful Farming magazine, financial experts spelled out what an interest rate hike would mean to corn and soybean farmers. Brent Gloy and David Widmar of Agricultural Economic Insights anticipate an increase of 100 basis points into 2016. For a cash grain farmer who finances $400 per acre of operating expenses, this increase would add $4 per acre in costs. Factoring in a 4% borrowing rate, the interest tab would increase from $16 to $20 per acre. This rise would also dampen the enthusiasm for agricultural equipment purchases."Our view is that interest rates aren't likely to rise enough in the short term to cause large decreases in profitability," says Gloy, a former Purdue University professor who farms in western Nebraska. "Overall, it's not likely that interest rate increases on non-real estate loans will place a huge burden on producers in 2016. However, it adds another cost to the ledger at a time when significant cost reduction is required." Terry Jones of Executive Ag Network and a Williamsburg, Iowa, farmer agrees. "People have gotten very forgetful about higher interest rates and what impact an increase would have on their operating line of credit, their debt, and costs of production," he says.Wrote by Cheryl Tevis, Successful Farming magazine.
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Well, they finally did it. The Federal Reserve raised Rates by 25 BPS to .25.
The Way I See Janet Yellen it was the Federal Reserve Chairperson staring at a tale of Two Errors. Raise rates on worsening economic data or pass on the hike and destroy what little credibility you have left? Pick your poison. She Picked Her / their credibility.
We had Really Two events today. First was the actual move in interest rates - the first raise in nearly 10 years. Janet Yellen was what would the Second Press Conference Her Say in.
What does that Mean to US?
The Dollar May Get Stronger as the Fed thinks the Economy is Moving in the Right direction healthily Enough that it needed to Raise Rates. That should strengthen the dollar and make us less competitive abroad. That does not help considering the CCI (Continuous Commodity Index) is off nearly 20% this year. That is a huge number. Oil has Hurt but so has the demand for Some of the Precious Metals Food stuffs produced here in the US
If the Raise Too Soon we was the next Might See Rates Move Back in interest to 0%. That would send an extremely bad signal to the markets that the world's largest economy is slowing again. We are in the middle of an earnings recession and our manufacturing sector is also contracting. Hardly these are the hallmarks of a Healthy Economy.
Obviously borrowing costs rise and Prime Rates Will. Will this have an Impact on our loans and Land prices.
The upside is that the Fed felt as though Things were good Enough to Go ahead and pull the Trigger. At least that is what they want you to believe. I Think they did it to Stay relevant, not for any Economic strength purposes, and Therein Lies the Danger.
Wrote by Scott Shellady, senior Vice President of TJM Institutional Services LLC.
Rates and Farming
In the recent Mid-November Marketing Issue of Successful Farming. Magazine, Financial Experts Spelled out what an interest rate hike would Mean to corn and soybean Farmers.
Brent Gloy and David Widmar of Agricultural Economic Insights anticipate an increase of 100 basis points Into 2016. For a Cash Grain Farmer Who Finances $ 400 per acre of operating. expenses, this increase would add $ 4 per acre in costs. Factoring in a 4% borrowing rate, the interest tab would increase from $ 16 to $ 20 per acre. This would also rise Dampen the enthusiasm for Agricultural Equipment purchases.
"Our View Rates are not likely to interest is that in the short term rise Enough to Cause Large decreases in profitability," says Gloy, a former Purdue University professor Who Farms in Western. Nebraska. "Overall, it's not likely that interest rate increases on non-Real Estate loans Will Place a huge burden on producers in 2016. However, it Adds another cost to the Ledger at a time when significant cost Reduction is required."
Terry Jones of Executive. Ag Network and a Williamsburg, Iowa, farmer agrees. "People have gotten very Forgetful About higher interest Impact Rates and what an increase would have on their operating line of Credit, their debt, and costs of Production," He says.
Wrote by Cheryl Tevis, Successful Farming Magazine.
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