This week Paul Neiffer has a conversation with Nathan Kauffman. He serves as vice president and Omaha Branch executive for the Kansas City Federal Reserve Bank. He’s also the Bank’s principal expert on the agricultural economy.
After growing up in a small town in northeast Michigan, spending time in Bosnia and earning a degree in economics from Iowa State University, Kauffman started his career with the Federal Reserve.
Listen to Neiffer and Kauffman’s conversation on the Farm CPA Podcast:
In his region, which includes Kansas, Nebraska, Oklahoma, Colorado, Wyoming, western Missouri and northern New Mexico, Kauffman says financial conditions for farmers are setting at solid levels.
“Generally speaking, financial conditions, both among borrowers and lenders have improved the past year and a half,” he says. “Farmland values in our region and across the Midwest are quite a bit over the past year or two.”
Yet, forces such as supply chain challenges, labor shortages and inflationary pressures are offering headwinds to the ag economy. With his role, Kauffman spends a lot of time thinking about inflation and interest rates.
“The Fed has a mandate to on the one hand make sure that policy is providing as much as it can to accommodate maximum employment and economic growth,” he says. “On the other side it wants to maintain price stability.”
One of the tools the Federal Reserve uses to impact inflationary pressures is interest rates.
“With inflationary pressures rising, there’s been a little bit more discussion about seeing some increases in 2022,” he says. “It’s obviously difficult to suggest what that might be, but it could be two or three raises this year.”
Compared to recent years, Kauffman says, many of the risks facing farmers right now are due to broader economic macro conditions.
So how should producers plan during these uncertain and volatile times? Kauffman’s advice is to take a steady approach.
“Inflation can be really challenging for households to manage and challenging for businesses to make decisions about,” he says. “The longer some of those pressures persist, it is even harder to make decisions and make plans. Generally speaking, a disciplined approach to marketing and risk management is one that works pretty well from one year to the next, especially in an environment where there is as much uncertainty as there has been.”
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