Episode 63 - Short-Term Interest Rates and Identifying Financial Stress

The Fed cuts interest rates for the first time since 2024, easing short-term lending costs but offering little immediate relief for producers in a tough ag economy. Ryan Loy is joined by Erica Barnes Fields as they connect these market shifts to rising farm financial stress, drawing lessons from the 1980s crisis and outlining red flag warning signs and resources available to support farm families today.

Transcript

00;00;00;00 - 00;00;24;27
Dr. Ryan Loy
The Federal Reserve cuts rates - first time since December 2024. Expectations for future cuts are on the horizon. And how do I identify financial stress on the farm? That and much more in this episode of Morning Coffee and Ag Markets.

00;00;24;29 - 00;00;39;15
Dr. Ryan Loy
Well, my name is Ryan Loy and with me in the studio today is Mrs. Erica Barnes Fields. She is the Associate Center Director for the Southern Risk Management Education Center, a licensed social worker, as well as a certified financial social worker. Erica, how are you doing today?

00;00;39;22 - 00;00;41;21
Erica Barnes Fields
All is well, Ryan. Thank you for having me.

00;00;41;21 - 00;00;58;13
Dr. Ryan Loy
Thank you so much for joining. We're going to be talking about a few topics today, and I really want to emphasize some of the work you're doing with identifying farm financial stress. And, you know, what people can do about it. But first, I really wanted to kick this off by discussing a topic that we've talked about several times on this show, the federal funds rate.

00;00;58;13 - 00;01;16;11
Dr. Ryan Loy
Now, recall the federal funds rate, you know, not to get into the details again that we've discussed on here before. It's going to really influence those short term lending rates. And so when you're talking about your operating notes, this is going to really be the main driver for what you're paying in interest. So last week the Federal Reserve met, the Federal Open Market Committee,

00;01;16;11 - 00;01;40;07
Dr. Ryan Loy
like we've talked about before. They decided to cut the federal funds rate a quarter of a percentage point. And again, I mentioned that was the first cut since December 2024. So it's been a while since we've seen this happening in the markets. That brings the federal funds target rate to about 4% to 4.25%, meaning the effective rate, the true rate that people are paying, the banks are paying right now is about 4.09%.

00;01;40;07 - 00;02;03;13
Dr. Ryan Loy
Now, that directly influences the prime rate, which is really what sets the basis for that short term lending in banks. And the prime rate has dropped to about 7.25%. In his minutes afterwards, Chairman Powell indicated that they're expecting probably two more rate cuts before the end of the year. But was cautious in saying that every decision is going to be a meeting by meeting decision, because big things can change during that time.

00;02;03;13 - 00;02;28;15
Dr. Ryan Loy
The expectation is for each one of those cuts to be 25 basis points, which means a quarter percentage point each. So the expectation as we stand right now is for the rate to be cut a full half a percentage point before the end of the year. They cited their increasing focus on the labor market. You know, one of the things we've talked about is that the Fed's goal is to find that balance between their inflation target and the labor market in their unemployment.

00;02;28;15 - 00;02;45;23
Dr. Ryan Loy
And so now that they're starting to see some of these pressures come into the labor market, you know, there's not as many jobs as expected, there's more layoffs. And so they're trying to have some preemptive action versus acting when it's already happening. You know, citing those job growths and the weakening labor markets have been their biggest motivation for this cut.

00;02;45;23 - 00;03;07;10
Dr. Ryan Loy
You know, in the longer term notes, this is not going to necessarily influence your longer term notes, such as a mortgage or even equipment loan, directly, necessarily, because those are longer term. They have a lot more influence from expectations of inflation in the future, where the economy's heading, which really all boils back down to the Treasury yields, which is what those longer term notes are based off of.

00;03;07;10 - 00;03;29;09
Dr. Ryan Loy
So again, those market expectations for the rate to come down, that short term rate cut next year, you know, on your operating loan, hopefully we can see some reprieve from that next year when you go and renew your loan and hopefully even more before the end of the year. But to even consider that, as we stand right now, the ag economy is in one of the worst spots that I've seen in my, you know, 29 years on Earth.

00;03;29;09 - 00;03;49;14
Dr. Ryan Loy
You know, I wasn't around during the 80s, but what we've seen in the ag economy as of late has been really eye opening. And while this is good news for short term lending, it still doesn't provide any instant relief. And so one of the things that I wanted to talk about today, and really bring Erica in here, is highlighting some of the work she's been doing to help identify some of these stressors on the farm.

00;03;49;14 - 00;04;12;02
Dr. Ryan Loy
And really, what we're going to be talking about is a fact sheet she just recently came out with, which I will link in the newsletter. And it's called Identifying Financial Stress in Farmers and Ranchers: A Guide for Families, Friends and Agricultural Community Stakeholders. And essentially it details what's going on in the ag economy, why farmers are perhaps at a higher risk than most for financial stress, and what can be done to help.

00;04;12;02 - 00;04;32;17
Dr. Ryan Loy
And so to kick this off, Erica, in your report, you draw some parallels between today's financial stress in agriculture and the 1980s farm crisis, which a lot of our listeners, if not most, are very aware, or if not experienced themselves. So considering that, in your view, what lessons carry over from the 1980s that are really still applicable today?

00;04;32;17 - 00;04;58;28
Erica Barnes Fields
Well, first, let's start with farming is more than a job. It's an identity, a calling, and a generational promise. Yet today, many of our farmers are reaching their breaking point. The 1980s showed us just how quickly low prices, high debt, and double digit interest rates could devastate our family farms. Many families face foreclosure, hundreds of thousands lost everything, and farmer suicides spiked.

00;04;58;28 - 00;05;30;18
Erica Barnes Fields
By 1981, less than 3% of Americans farm. Yet those losses reshaped our rural America. So the lesson is clear. Financial stress is never just about the numbers. It impacts identity, our farm families, as well as the community. Today, with only 2% of U.S. population farming, we must spot red flags early, help open conversations, and connect our producers with both financial and mental health support

00;05;30;18 - 00;05;32;29
Erica Barnes Fields
so history does not repeat itself.

00;05;33;00 - 00;05;49;23
Dr. Ryan Loy
I think that's perfect. And really, when you're talking about, you mentioned double digit interest rates during that time in the 80s. And while we don't see that right now, you know, when you think about how much is borrowed, right, compared to what was borrowed back then, you know, we're really looking at a, kind of it comes out in the wash, right, in terms of how stressful these situations are.

00;05;49;23 - 00;06;04;22
Dr. Ryan Loy
So while, you know, we may look at that and say, oh, well, our interest rates are not as high as the 80s, well, we weren't borrowing as much back then either, right? And so it's a, it's a very serious situation we're in. And we all know that, you know, things like this, and identifying and having these discussions is so important.

00;06;04;22 - 00;06;23;24
Dr. Ryan Loy
You know, one of the things you mentioned in your write up is farmers and ranchers are typically at higher risk for stress and these mental health challenges compared to occupations. So I'm just curious, you know, I think we all kind of know why. But I think it's important to discuss. Why is it that farmers and ranchers are at higher risk for this compared to somebody who may be just in the working force?

00;06;23;24 - 00;06;51;14
Erica Barnes Fields
So farmers carry unique burdens. They could face identity loss because, as I mentioned earlier, farming isn't just a job. It's also who they are. Farmers also face a lack of control with unpredictable weather, changing tariffs, markets and labor shortages which are all beyond their control. Another unique burden would be rural isolation, which includes working long hours alone, no sick leave and limited access to behavioral health care.

00;06;51;15 - 00;07;16;10
Erica Barnes Fields
The fourth unique burden would be generational legacy. So when the farm is at risk, it feels like letting down ancestors as well as their future heirs. And the fifth unique burden would be the stigma of reaching out for help. Many turn to prayer and feel ashamed to seek professional help, so our research shows that suicide rates among farmers are about 3 to 5 times higher than the general population.

00;07;16;10 - 00;07;23;29
Erica Barnes Fields
Persistent stress combined with these unique challenges can spiral into depression, hopelessness, and despair.

00;07;24;04 - 00;07;40;10
Dr. Ryan Loy
That's very important to talk about here, and I really appreciate that you bring up the fact that it's not just a job, it's a livelihood. And, you know, this isn't just, you know, not to trivialize anything, but this isn't you know, I work for a big company and they restructure and I lose my job - well, I lost my job.

00;07;40;10 - 00;08;02;15
Dr. Ryan Loy
But when it's the farm, you know, you lose much, much more than just your job. And it's very difficult. I can't even begin to understand how difficult that is. And I know that we all, you know, some days are better than others. And I know that everybody has some of those struggles sometimes, right. But when you talk about that stigma surrounding talking to people, I think that most and a lot of people fall into that in terms of, oh, I can get through this, I'm strong or things like that,

00;08;02;15 - 00;08;18;28
Dr. Ryan Loy
right? But it's very important to discuss that. And we're talking about farming. It's not just the job, it's not just the work that you do. It is so many things that is all entwined in that work. And when those things start to stress, it's not just one stressor, it's a million other things, right? Yeah. And so you brought up the no sick leave.

00;08;18;28 - 00;08;34;26
Dr. Ryan Loy
You know, there's no mental health days in farming, right? We're blessed being, you know, work to where we can have those sick days and those health days, like most people do. But farmers don't have that same blessing. And so that's a very important thing to bring up. And I appreciate you talking about that. So you mentioned some of those red flag warning signs that they can look at.

00;08;34;27 - 00;08;48;26
Dr. Ryan Loy
You know, whether it's family, neighbors or even lenders. You know, lenders are kind of right at the front lines of this too, right? You know, they're going to be the, kind of that stop gap between, am I going to farm next to you or not? You know, in terms of can I get funding? And so the lenders are very much watching for this.

00;08;48;26 - 00;09;02;29
Dr. Ryan Loy
So what should these groups of folks look for in some of those warning signs? When a farmer is under this extreme financial stress, you know, how do I identify the financial stress that is long time coming and is really impacting them versus somebody just being upset or having a bad day?

00;09;02;29 - 00;09;28;02
Erica Barnes Fields
So when a farmer’s stress runs deep, it shows up everywhere. It could be verbal, saying things such as, I feel like a failure or my family would be better off without me. Another side could be behavioral. Withdrawing from the farm, uncharacteristic anger, neglecting bills, chores, possibly substance misuse. The third red flag would be operational, such as mis planting or harvesting

00;09;28;02 - 00;09;58;01
Erica Barnes Fields
that impacts profit. Sudden downsizing without a plan, or neglecting the livestock and the crops. The fourth red flag would be emotional or physical. Hopelessness, disrupted sleep or eating, persistent aches and pains. And if any of these four signs: verbal, behavioral, operational or emotional, if they last for a couple weeks, it's time for that farmer, family, community, to take it seriously and definitely reach out for help.

00;09;58;05 - 00;10;17;12
Dr. Ryan Loy
That's right. And I think that's very important. You know, in terms of looking at this and saying, well, you know, somebody can have a bad day. But if this is a persistent thing with major shifts with very little plan, right. You know, these are some of those warning signs to look out for. I know from personal experience, it may be difficult to start those conversations with folks, or even if having a bad day, it's difficult for maybe folks to approach me.

00;10;17;12 - 00;10;25;16
Dr. Ryan Loy
So what's the best way for these friends, families, or even the community as a whole to start these conversations without judgment on both sides?

00;10;25;19 - 00;10;48;09
Erica Barnes Fields
Yes. So the best thing we can do isn't to fix, instead is to listen. Ask gentle, open questions such as how are you holding up? Or, I've noticed you seem quieter. How are you really doing? Use “I” statements like I've noticed that you don't seem to enjoy farming like you used to, or hey, I care about you. I just want to check on you.

00;10;48;12 - 00;10;57;26
Erica Barnes Fields
Avoid minimizing the struggles. Just be present. And listening without judgment, it interrupts the shame and it creates a space for hope.

00;10;58;03 - 00;11;22;09
Dr. Ryan Loy
That's perfect. That’s a good point to bring up in saying, hey, turn it into an “I” thing and talk about, hey, I've noticed this and this is what's going on, and really try to connect with that person on a deeper level. Well, Erica, this has been some fantastic information and I really, you know, want to just kind of put out a message and ask you, you know, for folks who are struggling, but, you know, you don't know who to talk to or how to talk, what resources are available, and how can they really take that first step towards the support?

00;11;22;09 - 00;11;51;06
Erica Barnes Fields
So no farmer should shoulder these burdens alone. If you or someone you know is struggling, you can call or text 988, which is a crisis lifeline. Also, Ag Stress is an excellent resource. They have a helpline at 1-833-897-AGRI. In Arkansas. You can contact Arkansas Connect Now at (501) 526-3563.

00;11;51;10 - 00;12;06;13
Dr. Ryan Loy
Well this has been great information, Erica. I really appreciate you coming into the studio with me to share this. This is a very important and timely piece. We hope that anybody who is struggling with this will reach out to those resources. But also, we're a resource out here too. So, we are Extension, and reach out to see what we can do to help.

00;12;06;13 - 00;12;22;13
Dr. Ryan Loy
So, that wraps up this episode. And all those numbers that Erica had mentioned will be listed in the newsletter this week. So that wraps it up and stay tuned for our market report. Thank you so much for tuning in.