AUGUST 2022
Message from the President
Revamped Ag-LINK program providing relief to Ohio producers BY BRIAN RICKER, PRESIDENT
BRIAN RICKER
All of us at AgCredit hope you and your family are having a safe and enjoyable summer. As each year passes, it seems the summers go by more quickly. I associate the quick passage of summer to the adage “time flies when you’re having fun.” I hope you’re able to relate the speed of your summer to having a lot of fun as well!
margins for some time. All these variables should remind us to be more careful with our business decisions, effectively manage risk and be aware of the yellow caution flag that’s waving. With the elevated level of risk being experienced, now’s the time to prepare your farm operation for some challenging times ahead if commodity prices decline while farm inputs remain high and take several years to adjust downward.
During a recent meeting of our board and management team, there was a great deal of discussion about escalating inflation, as is vividly shown here:
One program on which we’ve spent considerable time and resources is designed to help our members manage increasing variable rates on operating loans: The Ohio Ag-LINK program. Operated by the state Treasurer’s Office, the program was recently revamped through the passage of House Bill 440. With today’s increasing interest rate environment, the program could help alleviate some interest rate risk for many Ohio agricultural businesses. Here are a few highlights of the updated program:
Inflation Rate
6.2
JUNE 2020 - MAY 2022
5.0
6.8 7.0
7.5
7.9
8.5 8.3 8.6
9.1
10 8 6
5.4 5.4 5.3 5.4
4.2
4
2.6 1.0
1.3 1.4 1.2 1.2 1.4 1.4
Jul 2020
2
1.7
Jan 2021
Jul 2021
Jan 2022
0
• Farms, agribusinesses and cooperatives are eligible to receive up to a 3% interest rate reduction on new or existing operating loans used to cover feed, seed, fertilizer, fuel, equipment and other costs. • Participants must have headquarters and 51% of operations maintained in Ohio, and loans must be exclusively used for agricultural purposes.
TRADINGECONOMICS.COM ) U. S. BUREAU OF LABOR STATISTICS
Ohioans engaged in production agriculture have experienced some significant price increases for inputs such as fertilizer and fuel. Thankfully, for the time being at least, many of our producers have also seen higher commodity prices resulting in some excellent margins. However, increasing geopolitical tensions, lingering supply chain constraints, higher inflation and climbing interest rates are increasing the overall risk profile of our general economy and, specifically, of the agriculture industry. Between March and June, the Federal Reserve raised interest rates by 1.5 percentage points, or 150 basis points. We anticipate some additional increases to variable rates will occur as the Fed looks to increase its funds rate several more times this year to combat inflation. It’s likely that the prime rate will be at 6% to 6.5% by year-end. Although 6% is not high from a historical standpoint, it’s certainly much higher than the 3.25% rate a year ago. While commodity prices are at very high levels, we know the runup is related to a variety of factors, including geopolitical tensions in Europe. We all know the commodity price pendulum can quickly swing the other way, resulting in negative
• Applications will be accepted year-round with new interest rate reduction figures announced at the start of each quarter. • The maximum loan amount increased from $150,000 to $500,000. In the future, loan caps will be assessed annually by the state treasurer. We’re always looking for ways to provide value to our members and their farms and agribusinesses. In addition to returning annual patronage dividends to our member-borrowers, AgCredit was actively involved in offering vital financial assistance during the pandemic through Small Business Administration’s Paycheck Protection Program (PPP) loans. Today, we’re focusing attention on providing members access to the Ag-LINK program. Not all lenders participated in the PPP program, and not all lenders will be participating in Ag-LINK. If you have an operating loan, I encourage you to consider Ag-LINK as a way to limit some of the variable rate interest rate risk you may be exposed to. And if you have friends or neighbors who do business with a lender that doesn’t participate in Ag-LINK, please feel free to let them know that AgCredit does.