County commissioners are urging the Biden administration and the U.S. Department of Agriculture to act to lower interest rates on loans to purchase farmland.
The request came just a day before the Fed announced a record 0.75 percentage point hike in interest rates to slow the economy and rein in inflation.
A resolution sponsored by Sen. Rene Garcia, passed in a 9-0 vote on June 15, directs county federal lobbyists to advocate for the proposal and the Office of Intergovernmental Affairs to amend the 2022 federal legislative package of the county to include this element.
The affordability of acquiring land for agricultural use largely depends on loan interest rates, the document says. “Rising property values and rising interest rates on loans can make it harder for farmers and would-be farmers to buy land for farming.”
“My goal is to try to help the farming community here in any way I can, which is one of the biggest industries we have,” Sen. Garcia told Miami Today. He said he had recently visited the South Dade community and one of the main concerns of farmers was the high cost of buying farmland and rising interest rates.
When asked if he was aware of any precedent of the federal government lowering interest rates for an economic sector, Senator Garcia replied that he did not know, “but I see what they do with the suspension of student loans; they’ve done it once, they’re talking about doing it again. I don’t see why they can’t do that for the farming community.
Although the proposal is feasible, it can be a daunting task to complete. “Yes it can; it will probably be more of a daunting task than reasonable,” said David Druey, regional president of Centennial Bank.
“Could the government do it? In a broad way, yes. Are they likely to? No, because it is too difficult to bracket what this sector is and what it is not,” he added.
For example, Mr Druey said, a logging operation harvesting trees for the next 20 years is part of the agricultural industry and authorities should decide whether or not to include these types of businesses in such a rate reduction proposal. of interest.
“There are a lot of agricultural businesses that should either be included or excluded and the problem is trying to figure out where that line would be,” he said. “The tree farm, in my opinion, is one of the most extreme; it’s still in agriculture, they’re still growing trees, but it’s a 30 or 20 year life cycle.
Abbey Omodunbi, assistant vice president and chief economist at PNC Financial Services Group, said that typically when the Fed raises interest rates it affects the whole economy and no sector is left out.
The U.S. Department of Agriculture, through its Farm Service Agency, administers agricultural loan programs that help farmers finance the acquisition and operation of farms, the resolution details.
These loans include farm property loans that can offer up to 100% financing and “are a valuable resource to help farmers and ranchers buy or expand family farms, improve and expand current operations, increase agricultural productivity and help with land tenure to save farmland for future generations.”
As of June 1, interest rates on loans provided by the Farm Service Agency range from 1.5% for farm property down payment to 3.75% for farm property microloans, the official site details the service.
In Miami-Dade County, about 63,233 acres of farms and rural land valued at $492 million are up for sale, according to Lands of America, a website focused on selling and buying land.
In the 2017 Census of Agriculture conducted by the U.S. Department of Agriculture’s National Agricultural Statistics Service, the county had 2,752 farms with an average size of 29 acres per farm. The same sheet notes that 95% are family farms; 99% sell some type of crop, while only 1% sell livestock, poultry and produce. These farms contributed 11% of the state’s agricultural sales.
More interest rate hikes are expected as Fed policymakers have said they expect them to rise to 3.4% by the end of the year, from 1.9% the previous year. they were planning in March.
Omodunbi expects interest rates to rise 50 basis points in July, 50 basis points in September, 50 basis points in November and 25 basis points in December. “They will continue to raise interest rates until inflation hits the Fed’s 2% target,” he said.
The most recent rise is expected to impact the economy within the next 30 days, and up to a year from now.
“I think you will see in the next 30 days if this rate increase from 75 [basis points] was enough to slow inflation, and if it’s not, the Fed has proven they’ll do another 50 or 75,” Druey said. “I think there has to be another rate increase before we see a significant slowdown.”
“It’s a variable lag. There is no constant time. [It] could take six months or a year,” Omodunbi said. He added that since the Fed started raising interest rates earlier this year, inflation has been going up, and that’s why they decided on 75 basis points instead of 50.
Mr Omodunbi said the PNC was watching the economic data closely to see if there were any signs of reduced consumer spending, signs of reduced activity in housing, and that they had just reduced l activity in several sectors.