Now may be the time to lock up interest rates for the next three to five years, says Bob Utterback, a market analyst speaking on a segment of today's AgDay TV.
With the Federal government pouring billions of dollars into banks to prop up the U.S. economy, intermediate interest rates are running 3% and long-term are running in the 4% range, says Utterback. "These are very attractive rates,” he says.
Farmers have not had to worry about interest rates since the early 1980s, when they hit highs of 20% or more. "Essentially, we've been in a bull market for the past 28 years in the bond market,” he says. But all that could change as the economy recovers over the next few years.
"In the next three to four years, interest rates will pop,” he says. "And farmers need to start thinking about margin protection.”
He recommends is locking up one-year variable rates now, and then using bonds to protect interest rates longer term. There is more upside risk than downside risk by waiting or doing nothing, he says.