Ep. 56 July 2025 Short-term Interest Rate Update

00;00;01;05 – 00;00;21;05
Dr. Hunter D. Biram
The fed maintains target rates. Jerome Powell cites inflation above the 2% target. And what implications are there from the looming tariff deadline? That and so much more on this episode of Morning Coffee and Ag Markets. I am your host, Hunter Biram, and with me today I have got Dr. Ryan Loy, Ryan, How are you.?

00;00;21;08 – 00;00;22;29
Dr. Ryan Loy
Doing well, Hunter, about yourself?

00;00;23;01 – 00;00;24;26
Dr. Hunter D. Biram
Good, good. How was your trip to Denver?

00;00;24;27 – 00;00;33;04
Dr. Ryan Loy
It was really nice, actually. I got to see some family. I got to go to two concerts, which I was not expecting to do. That’s always the best thing to do when you’re in Denver. I’ll tell you.

00;00;33;07 – 00;00;36;14
Dr. Hunter D. Biram
So there were two concerts? I knew about the one at Red rocks.

00;00;36;15 – 00;00;49;24
Dr. Ryan Loy
Yep. So went and saw Beck at Red Rocks on Sunday and then saw Caamp at Fiddler’s Green in downtown. Basically downtown Denver on Saturday.

00;00;49;24 – 00;00;52;15
Dr. Hunter D. Biram
Nice. So tell me about Red rocks. Have you ever been there before?

00;00;52;16 – 00;00;56;12
Dr. Ryan Loy
Yeah, I went for Billy Strings first headlining shows there.

00;00;56;12 – 00;00;56;29
Dr. Hunter D. Biram
No, way.

00;00;56;29 – 00;01;14;01
Dr. Ryan Loy
Two night run there a couple years ago, and that’s the only other time I’ve been. But I’ll tell you what, you can go and listen to somebody scratch a chalkboard at Red rocks, and it’s worth it. It’s such a cool venue and it’s just the acoustics are amazing and it’s a good time.

00;01;14;03 – 00;01;16;03
Dr. Hunter D. Biram
That’s awesome. Well, were there are a lot of people there for Beck?

00;01;16;03 – 00;01;35;24
Dr. Ryan Loy
Oh my goodness. I think it was oversold by a mile. I mean Red rocks is kind of unique in that it’s like a park too right. So it’s pretty open most of the times. It has bench seating and general admission seating like any other lawn would have. But most of the time people are just kind of like hanging out on the benches or hanging out in like, the trees.

00;01;35;27 – 00;01;40;08
Dr. Ryan Loy
It’s kind of a weird situation. It’s not like any typical lawn concert would be.

00;01;40;08 – 00;01;41;29
Dr. Hunter D. Biram
Hanging out in the trees?

00;01;42;01 – 00;01;52;10
Dr. Ryan Loy
Like literally people just kind of sit up in the trees and hang out and watch from there. Because the way Redbox is set up, they kind of have like a line of some trees going up it, and when it gets filled, you know, people just say, oh, I’ll just hang out up here.

00;01;52;12 – 00;02;07;03
Dr. Hunter D. Biram
How about that? So for those of you who don’t know and aren’t a regular listener, Ryan loves music, as do I. But Ryan really loves the history of all these bands, and so he’s also a Grateful Dead fan. And apparently there’s a concert tonight.

00;02;07;03 – 00;02;13;01
Dr. Ryan Loy
There is. There is a matter of fact, and my aunt, who I was visiting in Denver, is heading that way, actually, to go see those shows.

00;02;13;01 – 00;02;14;04
Dr. Hunter D. Biram
And you’re going to see it online?

00;02;14;04 – 00;02;27;05
Dr. Ryan Loy
I’m going to watch it online. It was too much, they priced me out on this one. It was expensive. And I’ll tell you, trying to deal with that kind of crowd in the middle of downtown San Francisco does not sound like a good time to me. So I’ll just watch from home and enjoy.

00;02;27;08 – 00;02;37;15
Dr. Hunter D. Biram
Understand, understand. Well, today we’re going to be talking about inflation and the fed and interest rates. That is Ryan’s bread and butter. And so I think it’s fair just to start off by asking the question of what is inflation?

00;02;37;19 – 00;03;07;22
Dr. Ryan Loy
Absolutely. So inflation in terms of what we’ll talk about today is really just a percentage change. So when they talk about inflation it is a percentage change measure. In terms of what we’re talking about today, we’re really referring to the personal consumption expenditure index which is what the fed uses as their measure of inflation. In short when you see inflation reads at x percent on the news, wherever you get your news from that is the PCE.

00;03;07;25 – 00;03;30;29
Dr. Ryan Loy
So if I say inflation came in in June, which is the most latest reading at 2.6%, that means from June 2024 till June 2025, prices on average for a basket of goods has increased 2.6%. Now, the fed understands and maintains that there’s going to be always some level of inflation in our economy.

00;03;30;29 – 00;04;06;09
Dr. Ryan Loy
And the goal that they said is a 2% in the long run. That is the inflationary measure that essentially our economy can keep up with and wages can keep up with anything above that. It’s very difficult to do that in terms of what they set in the long run for maximum unemployment and stable prices. That 2% target also gives them kind of wiggle room to react to certain economic shocks and be able to, you know, manage the money supply and manage the effective federal or federal funds rate, which is majority of what we’re talking about today.

00;04;06;12 – 00;04;11;03
Dr. Hunter D. Biram
Nice. So with the personal consumption, what personal consumption expenditure?.

00;04;11;03 – 00;04;11;18
Dr. Ryan Loy
Index.

00;04;11;25 – 00;04;14;01
Dr. Hunter D. Biram
Index, what are some things that are going to be in that.

00;04;14;07 – 00;04;34;29
Dr. Ryan Loy
So that’s going to be everything from they called a basket of goods. And also the economist, You know we understand the basket of those commodities or those goods. But think about it like this. Essentially what they do is they take an average cost for somebody to live in the United States in terms of what they need groceries, they need gasoline, they need housing, they need services.

00;04;34;29 – 00;05;06;09
Dr. Ryan Loy
They take a basically an index value in terms of what that would cost somebody to live in the United States. Now, this measure of inflation is a little unique in terms of they remove all energy and energy and food expenses from this basket because those are the most volatile pieces of information. So they want to remove that to see what those core prices in terms of, household supplies, services, vehicles, those sorts of things are going to be more or less expensive than a year before.

00;05;06;09 – 00;05;09;05
Dr. Ryan Loy
And that’s really what they’re what they’re taking into account.

00;05;09;07 – 00;05;13;26
Dr. Hunter D. Biram
So can you break down? I know there are different measures. Isn’t there like a monthly measure and an annual measure?

00;05;13;26 – 00;05;38;20
Dr. Ryan Loy
Absolutely. So for example, the measure of for June 2025 is 2.6 and the measure for May was 2.4. So month to month that increase 0.2. Right. So the month the month measure of inflation is basically 0.2 percent. But the annual measure of the inflation is going to be compared to that that month from the previous year. And so that’s the 2.6.

00;05;38;22 – 00;05;48;08
Dr. Ryan Loy
So compared May to May 2.4, May to June this year, 0.02 or 0.2. And then from June to June it was 2.6.

00;05;48;13 – 00;05;51;06
Dr. Hunter D. Biram
So when the Fed’s making their decision they’re using an annual measure?

00;05;51;06 – 00;06;11;25
Dr. Ryan Loy
Yeah, they’re going to use that annual measure. Because again when they talk about inflation it’s a long run measure. And so they look at that year time frame and a little bit longer in terms of where it’s expecting to head. And they’re going to use that excuse me. They’re gonna use that annual measure. Because again, if there might be some little shocks that they don’t want to react to within the month.

00;06;11;25 – 00;06;21;06
Dr. Ryan Loy
And again, there’s so much uncertainty going on right now in terms of imports and exports that they don’t want to react based off of a very small window of data.

00;06;21;08 – 00;06;29;25
Dr. Hunter D. Biram
And so inflation percentage change and this is going to be based on a general rise, I guess in the price of…..

00;06;29;25 – 00;06;52;20
Dr. Ryan Loy
Goods to live, that’s literally everything you need to live minus food and energy. Like in terms of you know, electricity bills, those sorts of things, they remove that out of there just to kind of have some more standardized core measure of a basket of goods that shouldn’t change that much annually, whereas food and energy can go up and down, up and down depending on the year time.

00;06;52;20 – 00;06;52;29
Dr. Ryan Loy

00;06;52;29 – 00;06;56;14
Dr. Hunter D. Biram

00;06;56;14 – 00;07;01;03
Dr. Ryan Loy

00;07;01;03 – 00;07;10;12
Dr. Hunter D. Biram
That makes sense. Yeah that makes sense. So then all right so we talked about that. So what does the fed do to address inflation. That’s not in line with the target.

00;07;10;15 – 00;07;27;28
Dr. Ryan Loy
Absolutely. So when we’re talking about you know in terms of not in line with the target, that’s going to be a persistent high level of inflation year over year. And so they set a 2% target in the long run. And they’re trying to get rates such that on average in the long run let’s say 5 to 10 years.

00;07;28;01 – 00;07;45;25
Dr. Ryan Loy
That averages out to about 2% year over year. Now the things that they do to control that is what they’re trying to do is basically deter investment. Okay. So one of the ways that they do that is to control the federal funds rate. Now, the federal funds rate is just the rate at which banks can borrow from each other.

00;07;45;25 – 00;08;07;12
Dr. Ryan Loy
Okay. So they have, you know, reserve requirements. I have to borrow from you, Hunter bank. Ryan Bank, I don’t have my reserve requirements or I need extra liquid cash. I’m going to borrow from you. You would charge me what the federal funds rate is now, I will turn around and charge what I what we call the prime rate to my most creditworthy customers.

00;08;07;14 – 00;08;27;26
Dr. Ryan Loy
So you can kind of think of the federal funds rate as the overlying or the, excuse me, the underlying rate that sets all short term borrowing from banks. And that’s that baseline. And then the prime rate’s going to be the baseline at which those banks will lend you money. Typically the spread between primary and the federal funds rates is about 3%.

00;08;27;28 – 00;08;38;27
Dr. Ryan Loy

00;08;38;29 – 00;08;41;17
Dr. Hunter D. Biram

00;08;47;24 – 00;09;02;06
Dr. Ryan Loy
So, you know, the Federal Open Market Committee, which is the committee that actually makes those key interest rate decisions part of the federal, Federal Reserve, they convened on July 29th and 30th of this year.

00;09;02;09 – 00;09;31;11
Dr. Ryan Loy
And this is going to be their July meeting. The next meeting will be in September. Then they’ll relook at data and see if they need to cut rates or keep it the same. And they actually set this. They convened on July 29th and 30th, and this meeting marked the fifth consecutive, meeting of the of keeping the target federal funds rate at four and a quarter to 4.5%, meaning the effective rates about 4.33%.

00;09;31;13 – 00;09;58;27
Dr. Ryan Loy
What does all that mean? All that means is that it’s going to cost a bank, at minimum 4.33% to borrow from another bank, and they’re going to set that prime rate about 7.5% based on that. And so when we’re looking at this and really it’s we’re kind of in a position now where we talked about this at the end of last year, we were looking at a whole percentage point to a percentage in a quarter rate cuts during this year.

00;09;59;00 – 00;10;24;14
Dr. Ryan Loy
Well, I mean, we’re here at the end of July and we still haven’t seen one rate cut this year at all. And so it’s becoming a big, you know, part of that squeeze that farmers are seeing, you know impacting their bottom dollar. When you know expectations are to decrease over you know, over this year and perhaps maybe some refinancing opportunities or next time when you go get your loan for next growing season, it would be a little less interest rate.

00;10;24;17 – 00;10;27;17
Dr. Ryan Loy
However, that seems to not have to come to fruition just yet.

00;10;27;19 – 00;10;32;07
Dr. Hunter D. Biram
Yeah. So, let’s talk about tariffs then. So where do tariffs play into this?

00;10;32;14 – 00;10;55;16
Dr. Ryan Loy
Absolutely. So in terms of the tariffs one of the main things that Powell Chairman Powell who is the chairman of the Federal Reserve, who kind of is the talking head for these decisions that come out of these meetings. You know, they’ve had mounting political pressures to begin easing these rates as soon as they possibly can, because, you know, from the white House perspective, they want more investment, more investment.

00;10;55;18 – 00;11;18;00
Dr. Ryan Loy
But from the Federal Reserve’s perspective, they’re looking at it and saying, we don’t know what the tariffs are going to do in terms of consumer prices. Recall that the measure of inflation is the cost of the cost of those basket of goods. Right. And so what they don’t know is what is the impact to these looming tariffs from other countries coming to the US and how that will play out in terms of consumer prices?

00;11;18;03 – 00;11;37;21
Dr. Ryan Loy
I think easily it’s easier to explain if you look at what happens if the decisions made and what could happen. So let’s say that the fed decided to cut rates at this meeting. Okay. Based off of, you know, maybe some other data, but they’re not too concerned about tariffs and not too concerned about the inflationary pressures that can come from that.

00;11;37;23 – 00;11;57;07
Dr. Ryan Loy
They cut the rate and inflation skyrockets because more people are investing. There’s more money going around, but those wages are not going to keep up with it. And the increase in, let’s say hypothetically there’s an increase in prices from those tariffs. They the only way they can react is to raise the rate again. And that would really, really make some people upset.

00;11;57;07 – 00;12;09;22
Dr. Ryan Loy
And so they’re trying to kind of walk that fine line to say, let’s make sure that we have we fully understand the impact of these tariffs once they go live to consumers in the US and make our decision based off of that.

00;12;09;24 – 00;12;17;20
Dr. Hunter D. Biram
So you said tariffs go live. So we had this looming deadline. There was an August 1st deadline right. But simplified to August 7th. Can you talk about that a little bit.

00;12;17;20 – 00;12;42;22
Dr. Ryan Loy
Absolutely. And so when I’m talking about the tariff deadline essentially, in short, and for all intents and purposes, you know, if trade negotiations with, with the US trading partners are not made before it was August 1st, now it’s August 7th. There was going to be a blanket tariff on those countries exports to the US. Now, that blanket tariff looks anywhere from 10% to about 40%, depending on what country it’s coming from right now.

00;12;42;22 – 00;13;03;14
Dr. Ryan Loy
Why do I care as a consumer? Why do I care as a farmer? The main point is, is that the tariff is an additional tax to import those goods. That tax go straight to the government, but that’s an additional expense to importers to bring in those goods. So no matter what, they’re going to be operating at either a lower profit margin, but they’re also going to have to charge more for it.

00;13;03;16 – 00;13;23;22
Dr. Ryan Loy
And so the question again, bringing back the Fed’s decision, the question for the fed that they still haven’t been able to answer yet is are those prices going to be, you know, kind of one time and come back down with trade negotiation changes or is it going to stick in. Those are going to be higher prices for a much longer time.

00;13;23;24 – 00;13;27;23
Dr. Ryan Loy
They want to see exactly how that will play out before making these kinds of decisions.

00;13;27;25 – 00;13;29;09
Dr. Hunter D. Biram
Sounds like a pretty tough decision.

00;13;29;09 – 00;13;43;22
Dr. Ryan Loy
It is a very tough decision. I always tell people I certainly do not envy Powell and I do not envy his decision. It’s like the weatherman. You’re going to almost be wrong every single time. Almost every single time. But you won’t know that you’re wrong until after the fact. Right. And this is what they’re trying to work on.

00;13;43;22 – 00;14;03;18
Dr. Ryan Loy
So really, in short, and you know, I’m a financial market nerd and I don’t blame people for not being that way, but really to try to tie this all back down to agriculture and why you should care about this is that with this uncertainty and the fed not making the decision to cut these rates and lower them over time this year because of the tariff uncertainty.

00;14;03;20 – 00;14;25;03
Dr. Ryan Loy
And really what I mean by tariff uncertainties is the uncertainty of price changes for the basket of goods. This is going to keep your short term operating costs, specifically your operating notes, to borrow higher for a little bit longer. And that’s something that I think farmers when they’re looking at this, you know, you don’t have to worry about maybe necessarily the measures of inflation.

00;14;25;03 – 00;14;35;10
Dr. Ryan Loy
But understand that maintaining this monetary policy as they call moderately restrictive, is going to be moderately restrictive on your borrowing cost in terms of how expensive it will be.

00;14;35;12 – 00;14;39;25
Dr. Hunter D. Biram
Now, this will be on a new loan. So let’s say they’ve already got production loans that are out. This won’t impact those loans.

00;14;39;25 – 00;15;00;08
Dr. Ryan Loy
No no it won’t impact those loans. You know they started cutting it in December of last year and they cut it about a whole percentage point. And so starting this year they were starting better than they were in, you know, 24 at the beginning of the year. Sure. But the expectations going into this year was for many more cuts that we just haven’t seen yet.

00;15;00;10 – 00;15;12;16
Dr. Ryan Loy
And so, again, in a time where financial stress is almost insurmountable at this point on the farm, I mean, we need we need everything we can get in terms of just trying to lower those, cost items on a budget.

00;15;12;18 – 00;15;20;11
Dr. Hunter D. Biram
Absolutely. And so just to, to just to revisit what we started with, a farmer would be facing, would they be facing the 7.5%? It could be even more than.

00;15;20;12 – 00;15;31;14
Dr. Ryan Loy
Oh, I would say more than that. I mean, that’s at minimum for short term borrowing. And how I always equate it is that that’s 7.5% is really reserved for somebody who’s been borrowing from them for. a long time.

00;15;31;14 – 00;15;32;17
Dr. Hunter D. Biram
So great credit.

00;15;32;20 – 00;15;50;10
Dr. Ryan Loy
Great credit and you’re not our age, you know what I mean? Somebody who’s been borrowing for them for years that they have no concerns about, but a beginning farmer and rancher who’s our age, it’s going to be much higher. You know, I’ve seen operating notes go for you know, nine, 9.5% plus right now.

00;15;50;16 – 00;15;50;25
Dr. Hunter D. Biram
Oh my Gosh. Yeah.
 That’s crazy. Especially when you’re dealing with hundreds of thousands of dollars worth of operating expenses.

00;15;50;25 – 00;15;51;24
Dr. Hunter D. Biram

00;15;51;26 – 00;15;56;09
Dr. Hunter D. Biram

00;15;56;09 – 00;15;58;14
Dr. Ryan Loy
That’s right. It gets very expensive very quick.

00;15;58;16 – 00;16;01;26
Dr. Hunter D. Biram
Oh my goodness. All right. Are there any other thoughts that you want to share today.

00;16;01;28 – 00;16;21;08
Dr. Ryan Loy
No. In terms of just, you know, from a farmer’s perspective, keep an eye on trade negotiations where those are headed. And because that holds a lot of implications, not for just your inputs, but also your downstream export markets and all of that. All of that boils back down to the federal, the Federal Reserve’s decision to set those short term borrowing costs.

00;16;21;11 – 00;16;24;21
Dr. Hunter D. Biram
All right. Well, Doctor Loy, thanks for joining me in the studio today.

00;16;24;24 – 00;16;25;27
Dr. Ryan Loy
Thank you so much.

00;16;25;28 – 00;16;27;29
Dr. Hunter D. Biram
All right. You’ll stay tuned for this week’s market report. Thank you!

00;00;01;05 – 00;00;27;17
Dr. Hunter D. Biram
All right. Howdy, folks. Hunter here with your market report September 2025. Corn futures coming in at $3.83 a bushel. That’s going to be down, $0.15 from a month ago and up $0.06 from a year ago, which was at 3.77. September 2025. Rice futures coming in at $12.72/cwt. That’s going to be down $0.32 from a month ago.

00;00;27;18 – 00;00;52;00
Dr. Hunter D. Biram
And that’s going to be down $2.12 from a year ago. So a year ago, we were at 14.84 on September 20th, on September 2020 for rice futures. So that’s 14% decline year over year. November 2025. Soybeans, coming in at $9.88. That’s down $0.30 from a month ago. And that’s going to be down $0.15 from a year ago.

00;00;52;02 – 00;01;17;24
Dr. Hunter D. Biram
December 2025 Cotton futures coming in at 66.6 cents per pound. That’s a lot of S’s there. That’s down 1% from a month ago and down 3% from a year ago. Wheat coming in at $5.77 per bushel. That’s actually going to be coming up $0.34 from a month ago, and down $0.25 from a year ago. U.S. weekly average peanuts coming in at $550 per ton.

00;01;17;25 – 00;01;43;19
Dr. Hunter D. Biram
That’s going to be up $52 a ton from a month ago, and up $26 a ton from a year ago. Your Mississippi River level at Memphis is currently reading at 8.3ft. A year ago was 7.3ft. So that’s up one foot from a year ago. Arkansas highway diesel price currently at $3.40 a gallon. That’s going to be up from a month ago at 336 A and down from a year ago at 346.

00;01;43;21 – 00;02;07;10
Dr. Hunter D. Biram
Arkansas farm diesel coming in at $2.54 per gallon. That’s going to be down, from 269 a month ago and down from 259 a year ago. Now on to fertilizer prices. Urea coming in at $570 per ton. That’s going to be pretty much the same as a month ago, which was at 568 and up from three months ago, which was 548.

00;02;07;13 – 00;02;26;29
Dr. Hunter D. Biram
Ammonium nitrate coming in at $435 per ton. That’s going to be down $15 a ton from a month ago. That’s going to be down from three months ago at $520 a ton. Ammonium sulfate coming in at $540 per ton. That’s going to be up, from a month ago at 532 and down from three months ago at 548.

00;02;26;29 – 00;02;48;03
Dr. Hunter D. Biram
And so coming in at about average from, three months ago compared to the month ago. DAP is higher right now, $855 per ton. That’s up from 805A ton from a month ago and up from 762 three months ago. So it’s almost up $100 a ton from three months ago. Triple super phosphate coming in at $765 per ton.

00;02;48;04 – 00;03;09;08
Dr. Hunter D. Biram
That’s going to be up from 653 a ton a month ago, and up from 656 a ton from three months ago. Lastly, potash coming in at $463 per ton. That’s going to be up from $430 a ton one month ago and up from 448, which was three months ago. We hope that you enjoyed this podcast and that the information provided was relevant and useful to you.

00;03;09;11 – 00;03;23;29
Dr. Hunter D. Biram
You know, if you haven’t already, like and subscribe, and, leave a comment for us on the podcast. And if you haven’t signed up for the link for the newsletter, reach out and we’ll help you get signed up. So with that, thanks. And we will talk to you next week. Goodbye.