Higher Interest Rates Could Lower Crop Prices

Dec 28, 2015

Credit Jeff Engel, flickr Creative Commons

The Federal Reserve is set to hike interest rates over the next few years. That’s likely to cause a drop in prices of the Midwest’s most important crops, but not by much.

Higher interest rates can slow the economy, including demand for crops like corn and soybeans. At the same time, storing grain becomes more expensive. Farmers are eager to sell and that leaves excess product on the market.

Jeffrey Dorfman is a professor of economics at the University of Georgia. He said while these pressures are in place, the Feds are raising the rate so gently that crop prices should barely feel the bump.

"We'll never know what the effect of these interest rate hikes are going to be on corn and soybean prices because those effects are going to be so small compared to the market swings we see anyway," Dorfman says.

Dorfman predicts higher interest rates will push down corn prices by two cents a bushel and soybeans by a dime over the next year.