With 52,000 farms and 7.iii million acres of farmland, agronomics is one of the largest enterprises in Pennsylvania. It has an annual economic affect of $135.six billion and employs more than 575,000 individuals in the Commonwealth.
However, ongoing aggrandizement and rising involvement rates have farmers across central Pennsylvania considering their expenses and business plan. Many farmers take out loans to aid navigate the complexities of today’s business surroundings and they need to consider if they have loans maturing. If so, they are subject to repricing at current rates which take steadily increased so far this twelvemonth and expected to continue to rising every bit the Federal Reserve increases involvement rates. The current ascent interest rate environment matched with increased expenses due to inflation makes it more of import than ever for farmers and business owners work with a knowledgeable broker to find affordable solutions to assist sustain their businesses long-term.
Despite rising interest rates and the college costs due to inflation on items like fuel and fertilizer, farmers are likewise currently grossing college profits from sales given the higher commodity prices on items such every bit dairy, beef, poultry, corn, wheat, and soybeans. With the United States no longer sourcing nutrient, including wheat and soybeans, from Ukraine and Russia due to the war, there is more than demand for those products nationwide and abroad. This demand has helped the local agricultural industry surge every bit commodity providers, such as Pennsylvania farmers, have a broader market to sell to. The global food supply shortages are making homegrown produce more than sought-later on and bringing more than business to agriculturally rich places like central Pennsylvania. Farmers can capitalize on the higher demand for these commodities as other countries go on to turn to the U.S. to offset their food commodity shortages.
Historically, farms tend to do well during economic downturns. No matter what is going on economically, food is an absolute necessity and people are going to pay to consume, despite aggrandizement. People may choose to dine out less, but food eaten at home will notwithstanding have to exist purchased. And while recessionary periods typically see the values of assets like stocks and bonds turn down, farmlands historically increase in value. When done right, farmland tin can also be a relatively low-cost business to run, resulting in high return on investment and steady cash menses. Given these factors, at present may be an ideal time for farmers to leverage the electric current environment and work with their commercial lender to back up and grow their agronomical businesses to take advantage of this demand.
But the high commodity prices will not final forever, so it’southward not recommended to borrow money based on today’s higher-than-boilerplate prices. It’south more prudent for farmers to infringe at average commodity prices and so they can still make payments if involvement rates surge. We frequently stress-exam ag loans at higher interest rates, helping customers ready and ensure they can manage if the economical climate changes.
Although the ag industry traditionally thrives during recessionary periods, farms every bit businesses have to be properly managed and financially stable in lodge to prosper in any market place bike. Every footstep of the financing process should be handled with the guidance of an ag banking professional to ensure a farmer’s business organisation is fix upwards to weather all economic atmospheric condition. As a full general rule, farmers should create concern plans and financial buffers to withstand hereafter price increases, expenses and market volatility.
The electric current economic climate offers a proficient opportunity for farmers to aggrandize their ag business. But navigating the nuances of college interest rates, aggrandizement, and shifting commodity prices tin can crave extensive planning, so it’s critical to work with a team of professionals to help plan for long-term success and stability. Contact the Ag Lending team at Univest to encounter what’s possible as you navigate financial opportunities in today’s market.
Univest Bank and Trust Co. is Member FDIC, Equal Opportunity and SBA Preferred Lender.