The markets are expecting an interest rate cut next month. High rates have taken a toll on farming operations across the U.S., but Arlan Suderman with StoneX says expectations might not meet reality.
“The market has gone crazy on expectations of rate cuts, and I just don’t see from what the Fed says that’s going to happen. Right now, the market is pricing in expectations for a 25 basis-point rate cut in the September meeting, and I do think that will happen. Not necessarily in agreement with it, but I think the Fed clearly knows what the market expects, and at the last meeting and the recent comments that have been made in public, it has done nothing to dispel that thinking of a rate cut in September, although it’s maintained its neutrality and not committing to it. The market’s pricing in a full 100 basis-point rate cut by the end of the year. So that would be a full percentage reduction in the benchmark interest rate by the December meeting, and 200 basis points by next summer, by the July meeting, and I think that’s just frankly ridiculous.”
Interest rates have inflated operating loans for many producers. The Acre Act is currently making its way through Congress. The bill reduces the cost of arranging a loan, allowing banks to offer better rates. The Acre Act currently has support in both chambers but its chances are unclear as time runs out this session.
