The Federal Reserve Board decision to increase interest rates for the first time in seven years is likely to ripple into commodity prices, economists told Harvest Public Media. Professor Jeffrey Dorfman of the University of Georgia says the impact may be indistinguishable from the swings in price that are normal in the commodity market.
Nonetheless, Dorfman says the effect will lower corn prices 2 cents a bushel and soybean prices 10 cents over the next year. By comparison, the season-average price for this year’s corn crop is forecast by the USDA for $3.65 a bushel and soybeans for $8.90 a bushel. Higher interest rates affect farmers in two ways. They increase the cost of storage, which can prompt farmers to sell now rather than wait for prices to rally, and they drive up the cost of loans to buy seed, fertilizer, equipment, pesticides and other materials to grow crops.