But, over time, that would be partially offset by the benefits of lower inflation, according to economists at the University of Missouri- Columbia. The agriculture sector is fairly capital intensive, from the investment in land to the money tied up in breeding stock. Crop farmers would likely be hit hardest by interest rate increases. Livestock producers would feel less impact. A 1 percentage point increase in interest would raise cost of production on pork by 14 cents per hundredweight.
Interest rates affect agriculture beyond the farm gate.
Increasingly, agriculture depends on selling products abroad. There are benefits from increased interest rates for agriculture. The experience of the late 1970s and early 1980s gives a host of examples of problems associated with sustained high inflation. Lower inflation rates help lessen the growth in non-interest costs. Within the crop sector, the interest rate shock has different effects depending on the production costs.