Farmers should ‘buckle up’ as petroleum-related costs may add to interest expenses
April 28, 2026
By Mary Hightower
University of Arkansas Division of Agriculture
Fast facts
- Fed leaves interest rates unchanged
- Loy: Reductions in interest expense still modest compared to 2024’s recent peak
- Interest expenses represent significant contribution to on-farm price-cost squeeze
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Newsrooms: With Ag, food economics are hard to simplify
LITTLE ROCK — While interest rates have declined from post-pandemic highs, higher
input costs related to oil prices may add to farmers’ interest expense burden, said
Ryan Loy, extension economist for the University of Arkansas Division of Agriculture.
The Federal Open Market Committee of the Federal Reserve met March 18, voting to keep the federal funds target rate unchanged at 3.50-3.75 percent. The Federal Reserve said it was still committed to “returning inflation to its 2 percent objective.” Only one of the 12 committee members voted to cut the rate.
“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,” Loy said. “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.”
As operating expenses increase, farmers need to take out larger loans, Loy explained. Those larger loans result in higher interest expenses.
Looking at the first quarters in 2023, 2024, 2025 and this year, “estimated interest expenses for 2026 are down marginally compared to the peak rate of 2024,” Loy said.
Compared to 2026, operating costs in 2024 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, Loy said.
The reductions seen in the first quarter of 2026 are even more modest compared to interest costs in 2023 and 2025, Loy said.
Conflict and petroleum
Petroleum products are critical to agriculture. Not only do crop and livestock production require diesel to run farm equipment, but natural gas is also the source of the nitrogen used to make urea, a commonly used fertilizer.
The conflict in the Strait of Hormuz has sent prices for Brent Crude — the global benchmark for crude oil — on a rollercoaster ride. This may compound issues for growers, because of its “impact on the cost of inputs such as fertilizer and diesel,” Loy said.
“Many farmers already took out operating loans before the conflict began, and while they can likely put the increased cost in a revolving line of credit, they will now have to pay more interest expense because they have to pay back a larger amount,” he said.
The committee’s next meeting will be April 28-29. CME FedWatch indicated the odds were against any change in the interest rates.
“The expectation of near-zero rates might be unrealistic, but it’s important to highlight that even with lower rates, interest expense continue to contribute to the on-farm price-cost squeeze,” Loy said. “Farmers will be forced to buckle up to get through if the conflict lasts several months.”
To learn about extension programs in Arkansas, contact your local Cooperative Extension Service agent or visit uaex.uada.edu. Follow us on Facebook and Instagram. To learn more about the Division of Agriculture, visit uada.edu. To learn more about ag and food research in Arkansas, visit the Arkansas Agricultural Experiment Station at aaes.uada.edu.
About the Division of Agriculture
The University of Arkansas Division of Agriculture’s mission is to strengthen agriculture, communities, and families by connecting trusted research to the adoption of best practices. Through the Agricultural Experiment Station and the Cooperative Extension Service, the Division of Agriculture conducts research and extension work within the nation’s historic land-grant education system.
The Division of Agriculture is one of 22 entities within the University of Arkansas System. It has offices in all 75 counties in Arkansas and faculty on three campuses.
Pursuant to 7 CFR § 15.3, the University of Arkansas Division of Agriculture offers all its Extension and Research programs and services (including employment) without regard to race, color, sex, national origin, religion, age, disability, marital or veteran status, genetic information, sexual preference, pregnancy or any other legally protected status, and is an equal opportunity institution.
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Media Contact: Nick Kordsmeier
Nkordsme@uada.edu