Farm Credit Canada said interest rates will likely begin to decline late next year.
That’s despite indications that inflation could persist in the United States.
Krishen Rangasamy, manager of FCC Economics, said “the U.S. economy did well in the third quarter [of 2023], but decelerated quite a bit in the fourth quarter. What we see here is the U.S. Fed saying ‘we have raised rates enough, we think. They’re at 5.5 per cent now, and we’re already seeing interest rates have done their job.’”
The FC C said in its recent economic outlook that Canadian farmers have been well-positioned to weather the storm, especially when compared to others such aa homeowners with variable-rate mortgages.
Farmland prices have remained strong and farmers are buying equipment despite price hikes.
“Higher (interest) rates of course make life harder, because borrowing costs are higher,” Rangasamy said. “But farm cash receipts were good in both 2022 and 2023, which explains why we are seeing this resilience.”
The next challenge for farmers will be managing their interest rate risk. With long-term interest rates lower than short-term ones, a fixed-term rate might be more attractive.
