Interest rate for nine-month loans to be highest since 2009
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The interest rate on commodity loans disbursed in January 2016 will carry a 1.625% interest rate, up from 1.375% in December and the highest level since they were at 1.625% in May 2009, according to the Commodity Credit Corporation (CCC). The new interest rate level reflects USDA’s borrowing rate which is 0.625%. Provisions in the 1996 Farm Bill required the interest rate on commodity loans be set 1 percentage point higher than the borrowing cost. The interest rate in effect on January 1 is also CCC’s rollover interest rate. The interest rate on commodity loans with an outstanding balance on December 31 is rolled over to the January interest rate. The January interest rate on those “rolled over” loan balances will remain in effect until the loan is either repaid, forfeited, or the succeeding January 1 arrives, whichever is first. Rates in effect for the farm storage facility loan (FSFL) and sugar storage facility loan (SSFL) approved pending funding in January are unchanged from December at: 2.000% for FSFLs with 7-year loan terms 2.250% for FSFLs with 10-year loan terms 2.375% for FSFLs with 12-year loan terms 2.500% for SSFLs with 15-year loan terms.
Comments: While the interest rate is up from December, it still represents a favorable level for farmers seeking cash flow and the ability to hold onto crops for ideally higher prices later. Already, loan use for 2015 crops is above levels seen for 2014 crops for wheat (58.928 million bu. vs 43.159 million bu.) and soybeans (96.213 million bu. vs 80.051 million bu.) while corn still trails with 507.424 million bu. under loan compared to 574.224 million bu. for 2014-crop corn. |
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