Are Large Farms Better Equipped to Weather an Interest Rate Hike?

Does farm size matter when it comes to managing interest rate hikes? It does, says Greg Pate, economic policy analyst with Ontario’s Ministry of Agriculture, Food and Rural Affairs, but not in the way you may think.

Bernard Tobin spoke with Pate at a recent half-day farm finance conference held at Guelph, Ont., to talk farm debt, interest rates and more.

In the interview below, Tobin asks Pate about recent work the ministry has been working on, and what a 1% and even 2% increase in interest rates could mean for farms servicing debt.

Related: Are we headed for a farm financial crisis?

Pate offers up some interesting insight into how farm size factors into debt management and servicing and how industry type plays a role, all the while stressing that farms run as businesses, regardless of size, are reasonably well equipped to manage changes in interest rates.

What’s more, Pate estimates that there is still a hefty percentage of farms that carry no or very low debt levels, but of greatest concern are the roughly 20% that have negative farm income (based on 2013 data). Looking forward to 2015, total net income is still a more important driver of farm success than farm size or interest rate moves, he says.

And just where are interest rates headed? Pate’s not going to forecast that one, but he does reassure listeners that a small increase in rates shouldn’t be a major concern for most farms. That and more, below.

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