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CME director says higher interest rates could be bad for ag

The executive director of the CME Group says the potential for higher interest rates could have a negative impact on agriculture.

Erik Norland spoke at the Oilseed and Grain Trade Summit in Minneapolis last week, and discussed the recent Federal Reserve decision to hold off on raising interest rates.

He tells Brownfield there is a strong likelihood the Fed will begin slowly increasing rates by the beginning of next year.

“If the Federal Reserve goes along with that very slow trajectory, which essentially is a rate increase beginning maybe late this year or early next year; followed by another rate increase roughly every six months until about 2018.  It shouldn’t have too much of an impact on agricultural goods prices or the dollar.”

But Norland says if the Fed decides on a faster pace of rate hikes.

“That could put upward pressure on the dollar, which would probably be bad for agricultural prices; at least when viewed from a U.S. dollar perspective.”

He says if rates aren’t raised, that would put downward pressure on the dollar, which would probably be supportive for commodity prices.