Farm Credit Services and DTN have partnered to display select long and short term interest rates on DTN's website - www.dtnag.com - and DTN subscription services providing another way to offer value and information to producers and rural America. Here is the story currently running on the DTN sites:

Inflation fears could trigger big moves in long-term farm interest rates

Reprinted with permission from DTN - If you're too young to remember miniskirts the first time around, the Ed Sullivan Show or gas prices at 33 cents a gallon, you might not recognize how cheap farm mortgages have been the past few months. But like those fond 1967 flashbacks, all good things eventually end.

In early 2008, 10-year Treasury rates twice fluttered to lows near 3.3 percent -- what's known to chartists as a technical bottom -- then began marching upward.

While these low rates aren't an all-time record, they remain one of the most attractive interest rates eras for borrowers in the last 41 years, said Bill Lankswert, treasurer and vice president of finance for the Louisville-based Farm Credit Services of Mid-America. To put it in perspective, Monday's 3.78 interest rate ranked in the one percentile of low Treasury rates, he noted.

"It means that at that point, interest rates have been higher 99 percent of the time," so today's rates are a relative bargain, said Lankswert. "The concern I have now is that commodity prices have risen so much, and the Federal Reserve has cut rates so much" that inflation fears will start to stoke rates back to more normal territory.

For credit-intensive farmers, this could be a signal to lock in any long-term money now, Lankswert added. His institution offers an array of fixed rate mortgages, but qualified borrowers in its four-state area of Indiana, Kentucky, Tennessee and Ohio could lock in 6.5 percent, 15-year mortgages and 5-year, adjustable rate mortgages at 5.75 percent earlier this week. (For a sample of current farm real estate and operating loans which adjust daily, see the new listing of Mid-America's most popular rates on the Farm Business page at www.dtnag.com, or on DTN subscription services. Terms may vary but should be representative of Farm Credit System and agricultural bank rates available nationwide.)

"A lot of farmers sat on the fence January through March, waiting for the absolute lowest long-term rates," Lankswert said. "There's maybe a 25 percent chance they might drop again near-term. But how much do you want to risk?"

What's more typical is that long-term money trends aren't always in synch with the Federal Reserve's actions. In fact, long-term rates reflect inflation fears and the worry of higher short-term rates in the future, observed Tony English, chief financial officer for Frontier Farm Credit, Manhattan, Kan.

Like Lankswert, he agreed the tide may be turning for fixed-rate mortgages. "It's very important for producers with input cost inflation in fuel, fertilizer and volatile commodity prices to get a good handle on their risk tolerance," English said. Typical operating lines are up about 30 percent among Frontier's members this year, meaning growers must shoulder more interest rate and credit risk on top of other uncertainties, he said.

If they haven't already, growers should be having conversations with their lenders to find the right mix of risk tolerance for their operations, English advised.

Locking in a long-term interest rate now "is insurance against rate increases later," Lankswert concluded. "And it's still cheaper than 99 percent of the time in the last 41 years. Why wouldn't you want to do it?"