Weekly Digest: Farm Loan Interest Rates Rise
The Federal Reserve raised its benchmark short-term interest rates in late July. Prior to the announcement, the average interest rates charged in the second quarter of 2022 on variable and fixed rate loans were already trending higher at several major district banks serving agricultural markets.
According to quarterly reports and newsletters, the average interest charges on variable rate operating loans in the Chicago, Dallas, Kansas City and Minneapolis Federal Reserve Districts averaged 5 .52% on July 1, compared to 4.88% in the previous quarter.
Here is a summary of the individual districts:
- In the District of Chicago, nominal interest rates on variable loans reached their highest level since the second half of 2019. District average nominal interest rates on new operating, intermediate and agricultural real estate loans were respectively at 5.42%, 5.53% and 5.17%. .
- In the District of Dallas, interest rates on variable and fixed loans were the highest since the second quarter of 2020. Interest rates on variable operating, intermediate and real estate loans averaged 5.67 %, 5.53% and 5.3%, respectively; fixed loan rates averaged 6%, 5.81% and 5.45%, respectively.
- In the District of Kansas City, average rates rose about 60 to 70 basis points from the prior quarter. In most cases, interest rates were the highest since the fourth quarter of 2019 and the first quarter of 2020. Interest rates on variable operating, intermediary and real estate loans averaged 5, 55%, 5.47% and 5.18%, respectively; fixed rate loan rates averaged 5.75%, 5.75% and 5.5%, respectively.
- In the Minneapolis District, interest rates were another spike in the cost of inputs for farmers, rising significantly in the second quarter after a moderate increase in the previous quarter. Interest rates on variable operating, machinery and real estate loans averaged 5.45%, 5.3% and 5.1%, respectively; fixed rate loan rates averaged 5.5%, 5.5% and 5.4%, respectively.
The latest Global Dairy Trade (GDT) auction saw the overall price index drop 2.9%, marking the 10th drop in the last 11 auctions. Average prices across product categories were mixed at the August 16 auction, including:
- Skim milk powder rose 0.1% to $3,524 per metric ton (MT, or about 2,205 pounds).
- Whole milk powder fell 3.5% to $3,417 per metric ton.
- Butter rose 0.2% to $5,204 per metric ton.
- Cheddar cheese rose 4.2% to $5,005 per metric ton.
- Anhydrous milkfat was down 9.8% at $4,990 per MT.
The GDT platform offers dairy products from six global companies: Fonterra (New Zealand), Dairy America (USA), Amul (India), Arla (Denmark), Arla Foods Ingredients (Denmark) and Polish Dairy (Poland). The next GDT auction will take place on September 6.
The USDA’s Farm Service Agency (FSA) has increased Livestock Indemnity Program (LIP) payments for young dairy and beef cattle, retroactive to the start of the year.
The highest payments are for non-adult animals in the beef, beefalo, buffalo/bison and dairy categories. Payments for dairy cattle under 250 pounds increased from $45.32 to $255.47 per head; payments for beef cattle under 250 pounds increased from $175.27 to $474.38 per head.
Authorized in the 2018 Farm Bill, the LIP provides benefits to eligible livestock owners or contract ranchers for livestock deaths above normal mortality caused by qualifying loss conditions, including qualifying severe weather, qualifying disease and attacks on animals reintroduced into the wild by the federal government. government or protected by federal law, including wolves and avian predators. In addition, the LIP provides assistance to eligible livestock owners who must sell livestock at a reduced price due to an injury resulting from an eligible loss condition. LIP payments are equivalent to 75% of the market value of the livestock concerned.
The updated LIP payment rates are effective immediately and will be applied retroactively from January 1, 2022, for all qualifying causes of loss, including excessive heat, tornadoes, winter storms and other qualifying natural disasters. Producers who have already received LIP payments for 2022 will receive an additional payment, if any, proportional to these updated rates.
Owners or contract growers can apply for LIP benefits through local FSA offices. For more information, see the LIP fact sheet.
Dairy Farmers of America (DFA) and Pizza Hut are partnering on a project to provide participating farmers with the technology and data needed to help reduce greenhouse gas (GHG) emissions.
The partnership aims to enroll DFA members in the FARM environmental stewardship program. Once registered, farms will receive a SCiO cup, a laboratory-grade dry matter analyzer, to analyze and adjust dairy rations to produce milk more efficiently, create less waste and reduce GHGs on the farm. Farms will also be able to apply for funds to implement sustainability projects and adopt other practices.
The goal of Pizza Hut, a subsidiary of Yum! Brands, is to source 50% of all dairy products used to make the pizza cheese served in the chain’s restaurants from dairy farms participating in the FARM environmental stewardship program.
The project is also part of a larger strategy to achieve other long-term sustainability goals:
- Yum! and Pizza Hut seek to reduce GHG emissions by 46% by 2030 with a focus on restaurants and the supply chain and achieve net zero emissions by 2050.
- DFA seeks to reduce GHG emissions by 30% across its supply chain by 2030 and is also part of an industry-wide collaboration through the Center innovation to make US Dairy greenhouse neutral or better by 2050.
The Northeast Dairy Business Innovation Center (DBIC) has announced three funding opportunities for dairy producers and service providers.
- On-Farm Milk Storage and Handling Grant: Dairy producers can apply for funds to support the purchase of equipment and supplies to improve milk storage, handling and energy efficiency. Applicants can choose from a list of eligible equipment. This grant has an application period from August 25 to October 25. 6. Grants will range from $15,000 to $50,000, with a 25% matching commitment. Match waivers may be available.
- Technical Assistance to Dairy Farm Cohorts: Service providers will be able to submit proposals to develop dairy farmer cohorts to address areas of technical assistance relevant to their region. Service providers can submit proposals for projects up to $150,000. Topics may relate to grazing, forage improvement, innovative farming practices, marketing and/or other areas of farmer support. The Request for Proposals (RFP) is open until September 16.
- Dairy Farm Production Education Funding: Funds are available for service providers and dairy farmer associations to develop events, webinars, educational series or conferences to increase dairy-based production. farmers and education for business sustainability. Proposals will be accepted for projects up to $35,000. The deadline to apply is September 16.
The Northeast DBIC serves an 11-state region including Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont.