35 Better Farming | November 2024 Follow us on @BetterFarmingON “We’ve seen that recently with feeder cattle future prices, which fell in August in large part because of investor concerns the U.S. economy was starting to show signs of weakness.” Crosbie also warns interest rates can influence currency values. If Canada’s rates remain low relative to other countries, the Canadian dollar might weaken, making our ag exports more competitive in the global market. Longer-term effects Crosbie explains that “lower interest rates can change the calculation of the return on long-term investments through something called the discounted payback period. “Decreased rates result in future cash flows that appear more valuable – meaning you recover your initial investment more quickly.” However, he warns that while decreased rates can facilitate access to credit, they might also encourage farmers to take on higher debt. If not managed wisely, this could lead to financial stress if market conditions change, or interest rates rise in the future. Nevertheless, Crosbie says, “In the long run, producers that can make these targeted investments today should benefit from higher productivity and/ or on-farm efficiencies.” Planning for the future “Every operation is unique,” Crosbie says. “Communication with your lender is incredibly important, as there are so many different factors to consider when choosing whether or not to make an investment, and what type of loan product makes the most sense for your operation.” He recommends that farmers evaluate the risks and benefits of these decisions and what they could mean if the economy were to change. “This includes, but is not limited to, the timing of capital investments (loans being paid off, when new investments will be required); product features, including prepayment limits and fees; cash flow and structure of existing debt, including existing floating debt exposure; and one’s own risk tolerance. “Scenario analysis can help operators understand their risk exposure within different economic environments,” he says. While lower interest rates present opportunities, farmers should remain vigilant about potential long-term implications, such as rising debt levels and market volatility as the economy eventually adjusts. Balancing the advantages of cheaper financing with financial management is critical. BF 22_0470_MH_PailsLids_HalfHoriz_US_MXsp Mod: September 9, 2024 9:07 AM Print: 09/09/24 page 1 v2.5 ORDER BY 6 PM FOR SAME DAY SHIPPING 1-800-295-5510 uline.ca PAILS AND LIDS IN ALL SHAPES AND SIZES CLOSED HEAD POLY SQUARE SCREW TOP OPEN OR CLOSED STEEL IN STOCK – SHIPS TODAY π MARY LOGGAN Mary is a graduate of the University of Guelph. She was raised on a dairy farm and currently operates an equestrian facility in Oxford County. Interest Rates
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