When have you ever seen interest rates so low? Variable rates are significantly lower than fixed terms, but at some point it seems logical to assume that rates are going to rise and then it will be good to have some loans locked up. Most analysts are saying that any big increase in rates is a long ways away. However, there is a fear that eventually the economy will go into a period of inflation with corresponding high interest rates. The low rates we have right now encourage more aggressive bidding on farmland and they make it easier to justify the purchase of equipment. What cash flows at four or five or six per cent interest wouldn’t be so easy if rates eventually went to eight, nine or 10 per cent. Back in the early 80s, high interest rates caused the failure of many farm operations. Rates of 15, 18 and 20 per cent plus put an incredible strain on all sorts of businesses. I recently had a producer tell me that he was paying $500 a day in interest back in those years. Debt is an important business instrument, but it needs to be handled with care. I’m Kevin Hursh.
Kevin Hursh, PAg, CAC