The Fed Moved Rates. The Long-Term Market Was Already Moving.
The Fed raised rates by a quarter point today, but changes affecting long-term borrowers had already started well before the announcement.
Treasury yields were already climbing heading into this week’s meeting, with the 10-year nearing 5% yesterday, levels not seen since the early 2000s.
That’s something we’re watching in agricultural lending.
The Fed has a stronger impact on short-term rates. Longer-term fixed rates depend on other factors, like market expectations for inflation and willingness to buy U.S. Treasury debt, economic growth, and future rates. So, a quarter-point move by the Fed doesn’t always mean the same change for a long-term farm real estate loan.
It also makes the fixed-versus-variable conversation a little more interesting right now.
Variable rates are usually more affected by short-term market changes, so today’s Fed decision can show up there more directly. Longer-term fixed rates are influenced more by what’s happening further out on the yield curve. Those longer-term Treasury yields were already moving higher before the Fed met.
While long-term inflation expectations have increased during 2026, they are not currently meaningfully higher than they have been over the previous four years, following the start of the Russian Ukrainian war.
Neither option alone tells you which loan structure makes more sense for your operation. Things like loan term, cash flow, how long you plan to carry the debt, and how much rate change you’re comfortable with all become part of that conversation.
Inflation is part of what the market is sorting through. August inflation came in at 3.4%, producer prices were up 5.4% from a year ago, and energy costs played a meaningful role in both reports.
Average diesel costs in the U.S. are now above $6.00 per gallon, the highest experienced during this century. Increased energy costs have led to a “supply side” inflationary pull that reverberates throughout the economy, ultimately increasing transportation costs and hence costs of most goods. It has a particularly meaningful impact on agriculture, which is heavily reliant on the fuel. It is also the hardest type of inflation for the Fed to tame.
If you’re thinking about buying land or refinancing, don’t assume today’s quarter-point increase will show exactly what your borrowing rate will do next.
The longer-term market was already adjusting well before today’s announcement. Where those yields go next will tell us how the market is reacting to today’s decision, the latest inflation numbers, and expectations for rates further down the road. And ultimately, what that means for longer-term borrowing conditions.
Taylor Kaus, CFA is an experienced finance leader specializing in agricultural lending, asset-liability management, and financial modeling. Taylor joined Conterra in 2020 as a Portfolio Manager. He has an MS and BS in agricultural economics and minors in mathematics and statistics from the University of Nebraska and earned the CFA Charter in October 2024.
Conterra Ag Capital is a private lender, focused exclusively on American agriculture. We offer a variety of specialized ag loans designed to meet the specific needs of farmers and ranchers nationwide. With a team of experience relationship managers strategically located across the country, we provide regional expertise and personalized service to our clients. Whether you’re a seasoned producer or new to the industry, Conterra is committed to supporting your agricultural endeavors. Our people, products, and process-driven approach to lending makes us unique.
Disclaimer: Please note that the information provided in this article is for educational and informational purposes only, and should not be construed as financial or investment advice. While we have made every effort to ensure the accuracy and reliability of the information presented, Conterra Ag Capital and its affiliates make no representation or warranty as to the completeness, correctness, timeliness, suitability, or validity of any information contained in this article. You should always consult a qualified financial advisor, tax professional, or other qualified professional for advice on your specific financial situation.
