How Are Long-Term Interest Rates Impacting Farmers?

Long-term interest rates are moving higher.  But, ask Curt Covington, Executive Vice President and Chief Credit Officer at Farmer Mac, he’ll tell you the farming community saw the writing on the wall about interest rates well before hand.

“Up until this last year, most of them were on the short end of the yield curve," Covington said.  "They saw that the rates were still favorable on a favorable rates so they kept their borrowing costs down.  But the landscape has changed.  We’re seeing farmers more and more push out to the long end of the yield curve, even out to 30-year fixed rate products that we offer.”

Covington added most producers are uncertain of the Fed’s plans into the future, forcing many to act now.

“I’m pretty sure that rates aren’t going down.  Could we see a 100 point basis point increase?  Hard to say, but if I get a chance to lock in a really good long term fixed rate loan, now’s the time to do it.  So, from a pragmatic standpoint, most of those farmers that talk with us today, are somewhere on the 15 year, sometimes 30 year time horizon on their amortization.”

Covington noted despite good financial decision by many in the industry, the five-year down turn in the farm economy is forcing many to ask very challenging questions about how to preserve as much equity as possible.

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