Following the benchmark rate reductions in 2025, the Federal Open Market Committee (FOMC) left the federal funds target rate unchanged at 3.50–3.75% at its March 2026 meeting (Federal Reserve, 2026). While benchmark rates have come down from post-pandemic highs, borrowing costs continue to remain elevated compared to the low-interest-rate environment before 2022. For farmers across the country, this poses a significant challenge, as interest expenses remain a notable portion of crop budgets while trying to balance the drastic increase in operating expenses. The expectation of near-zero rates might be unrealistic, but it’s important to highlight that even with lower rates, interest expense continues to contribute to the on-farm price-cost squeeze.
Table 1 is derived from a previous article (see Loy, 2023) and updated to reflect an average budget for a Midsouth corn, cotton, rice, or soybean farmer in 2026. Interest expenses are based on the average fixed operating loan rates from the Federal Reserve Bank of Kansas City Agricultural Credit Survey. Operating loan terms are assumed to have a 9-month payback period and include select 2026 pre-harvest production expenses.
Table 1. Southern Region, Select 2026 Pre-Harvest Production Expenses ($/acre)
| Corn | Cotton | Rice | Soybeans | |
| Seed | $125.00 | $113.00 | $130.00 | $91.00 |
| Fertilizer | $360.00 | $290.00 | $258.00 | $117.00 |
| Pesticides | $54.00 | $205.00 | $118.00 | $93.00 |
| Fuel | $29.00 | $52.00 | $104.00 | $64.00 |
| Operating Interest Expenses at varying rates: | ||||
| Q1 2026 (7.20%) | $29.93 | $34.78 | $32.15 | $19.24 |
| Q1 2025 (7.50%) | $31.98 | $37.16 | $34.34 | $20.55 |
| Q1 2024 (8.20%) | $34.19 | $39.73 | $36.72 | $21.97 |
| Q1 2023 (7.43%) | $31.64 | $36.76 | $33.98 | $20.33 |
Note: Operating Interest Expense assumes a 9-month term (e.g., 7.20% * (9/12) * principal borrowed)
Table 1 illustrates that the benchmark rate reductions, when applied to this year’s production expenses, have provided little relief. Estimated interest expenses for 2026 are down marginally compared to the peak rate of 2024, when operating costs would have generated about $4.26, $4.95, $4.58, and $2.74 more interest expenses per acre for corn, cotton, rice, and soybeans, respectively. However, the reductions are even more modest compared to interest costs in 2023 and 2025.
Overall, while interest expenses have eased, it remains a meaningful part of pre-harvest production planning. Recent benchmark rate reductions have provided some relief, but razor-thin on-farm margins persist. At the same time, higher input costs to grow the same crop have increased the amount that must be financed, potentially offsetting some of the benefits from a lower interest rate environment.
References
Board of Governors of the Federal Reserve System, Federal Open Market Committee. 2026. Federal Reserve Press Release, January 28, 2026. Retrieved from, https://www.federalreserve.gov/monetarypolicy/files/monetary20260128a1.pdf
Federal Reserve Bank of Kansas City. 2026. Federal Reserve Ag Credit Survey. Retrieved from, https://www.kansascityfed.org/center-for-agriculture-and-the-economy/agricultural-data-and-indicators/
Loy, R. 2023. The Federal Funds Rate Impact on Agricultural Lending. Southern Ag Today 3(34.3). Retrieved from, https://southernagtoday.org/2023/08/23/the-federal-funds-rate-impact-on-agricultural-lending/
Loy, Ryan. “What Lower Interest Rates Mean for 2026 Budgets.” Southern Ag Today 6(14.1). March 30, 2026. Permalink
