Rising interest rates could slow demand for farmland – PembinaValleyOnline.com
The Bank of Canada announced this week an increase in its key interest rate by 75 basis points to 3.25%, as it continues to fight inflation.
FCC Chief Economist JP Gervais spoke about the impact on farmers.
“Higher interest charges are actually impacting the margin. I think the good news is that demand for what we grow is still very robust, both domestically and internationally. at high input costs Costs have been I think margins are still positive for grains and oilseeds I think the fact that feed prices have come down a bit is a bit of a relief to livestock producers. “Overall, margins are projected to be positive for the coming marketing year, but there is no doubt that higher interest charges will impact margins.”
He notes that demand for farmland could be slowed along the way.
“A lot of the farmland market transactions we’re seeing right now are based on decisions that were even made before the rate increases we’ve seen, so we don’t expect to see that in the data for the first time. moment, but maybe in 2023 we will see a little bit lower demand for farmland, less transactions and that will slow down a little bit the demand which has been very strong for the last few years.”
Gervais expects to see more interest rate hikes by the end of the year.