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Interest Rate Trends for 2019

Dr. David Kohl
Educational Opportunities: 
Grain, Dairy, Swine, Beef, Timber, Young, Beginning Farmers, Women in Ag
Home > Education & Events > January 2019 > Interest Rate Trends for 2019

Hi, I'm Dr. Dave Kohl, Professor Emeritus and Academic Hall of Famer at Virginia Tech in Blacksburg, Virginia. Well, what's on the radar screen for 2019? One thing, is that we're going to be in an environment of rising interest rates. How many times? That's the million dollar question. We could possibly see two or three interest rate increases at 25 basis points or a quarter percent each, that could greatly impact producers in the Ag industry.

    It's important for you as agriculture producers, when you're doing your cash flow, to separate out the debt that is fixed interest rates, and variable interest rates, and sensitivity shock. Now, what should you keep in mind when looking at interest rates, and the news that comes out of the Federal Reserve? If unemployment stays in the low four percent or high three's, there is probably going to an increase in interest rates. 

    Second, if we see the economy continue to grow at three percent that will be another cue. The other thing that is starting to creep around the corner, is rising inflation. And if we see all three of these, remember interest rates are established not by the farm economy or middle America, it's often the coastal economy or the economy is driven by the consumer.

    The next element that you're really going to have to watch for and it's the 800-pound gorilla is going to be international trade tariffs. One of the things is, you're going to see a lot of volatility in prices and cost based off headlines, based off tweets. And so one of the things is, is to have a good business plan. And right along with that good business plan a good cash flow plan that's monitored so you can maintain that focus as you navigate the business whitewaters for 2019 and beyond.
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