Act now, if you've been thinking of buying equipment, economist Ed Seifried advises growers.
If there's a piece of equipment or software you've been thinking of buying or if you've been considering expanding your business, now is the time to take the plunge, economist Dr. Ed Seifried told growers at the Washington State Horticultural Association's convention.
"This is the time to invest," he said. "Interest rates over the next few months will be the lowest for decades to come."
Seifried, an economics and business professor at Lafayette College at Easton, Pennsylvania, discussed how to sustain profits in a global economy. Falling victim to bubbles is the biggest business mistake anyone can make, he said. For example, there was the dot-com bubble of the late 1990s and the housing bubble between 2000 and 2008. Bubbles burst when prices outstrip people's ability to pay. There's a bubble bursting in agriculture, and prices in the agriculture sector are on their way down. For example, in November, wheat was selling at less than half the price it was last February. Until the recession is over or the dollar becomes weaker, agricultural prices will continue to fall, he said.
Many economic indicators show that the country is heading into a serious recession, Seifried pointed out. By the end of 2008, interest rates were as low as they were going to get, with the federal fund rate at almost zero (compared with a high of 6.35 percent in 2000) and the prime rate at 3.25 percent (compared with 8.25 percent just two years ago). "If you're thinking of a loan, now is the time to pull the trigger," he said.
However, since the 1990s, periods of recession are becoming shorter and less severe. He predicts that in the coming year, the federal fund rate will climb back to 3.0 or 3.5 percent and the prime rate to 7.0 or 7.5 percent, and recommended that growers take out fixed-rate loans for purchases or expansion before interest rates rise. "Lock it in, and you'll be happy this time next year, as you'll see rates climbing through the roof."