What actually moves your interest rate

Four published benchmarks account for nearly all the paper written on timberland, rural land, logging equipment, mills and harvest operating credit in the United States. They are not interchangeable. Each is built from a different underlying market, each is published by a different body on a different schedule, and each behaves differently when conditions change.

Constant maturity Treasury yields

Published by the U.S. Treasury every business day as a par yield curve, and restated in the Federal Reserve's H.15 release. The curve gives a yield at each standard term - two years, five, ten, thirty. The five-year and ten-year points are the reference for fixed-rate land loans, timber tract mortgages and mill capital, because a lender writing a long loan wants a benchmark of matching length. Long Treasuries move on the market's view of growth and inflation over years, which is why a land rate can rise in a month when the Fed has not met.

The Farm Credit System's cost of funds

The Farm Credit System does not take deposits. It funds itself by selling consolidated debt securities in the national capital markets through the Federal Farm Credit Banks Funding Corporation, across terms from very short to very long, and what it pays for that money is published. A Farm Credit association's loan pricing is built off that wholesale cost. It generally tracks the Treasury curve, because it is priced against it, and the gap between the two widens and narrows with the market's appetite for agency debt.

SOFR, the Secured Overnight Financing Rate

Published every business morning by the Federal Reserve Bank of New York, derived from actual overnight lending secured by Treasury securities. It replaced US dollar LIBOR as the standard floating benchmark for commercial credit. A note can be written against overnight SOFR or against a forward-looking term rate built from it; either way, it is the reference under most new floating-rate mill capital, equipment paper and operating lines.

The prime rate

A published consensus of the base rate large US banks charge their strongest commercial customers, surveyed and printed by The Wall Street Journal, with an equivalent bank prime loan series in the Federal Reserve's own H.15. It is not a government rate and it is not a market rate. It steps when the Federal Reserve moves its target and then sits still until the next move, which makes it the most predictable benchmark on this list and the least sensitive to what the bond market is doing in between.

The practical difference between them is how often they reprice. Treasury yields, the System's funding cost and SOFR are market rates that reset every business day. Prime is an administered rate that steps. A borrower on a Treasury-linked quote is exposed to what happens between the appraisal and the closing; a borrower on a prime-linked line usually is not, until the Fed moves and then he is exposed to the whole step at once.

The benchmark under a loan follows the collateral and the term, not the borrower. Long, secured, real-property lending is priced off long benchmarks. Short, moving or unsecured lending is priced off short ones. That is why the same landowner can be quoted off a long Treasury on the tract and off a short floating rate on the operating line in the same week without anyone contradicting himself.

The table below is the map. It carries no rate and no spread range, deliberately: a benchmark is a published fact and a spread is a decision made about one file on one day, and printing a range here would hand a reader a number to quote at a banker that was stale before he got to the parking lot. What the table does carry is the comparison - which loans price wider than which, and the reason - because that part is still true next year.

Your neighbour's rate is different from yours because his spread is different from yours. You are almost certainly being priced off the same published benchmark; what separates the two quotes is the risk premium each lender added. Nine things move it, and a loan officer will name most of them if you ask him directly which ones are driving your number.

• Whether the collateral produces income. A managed stand that throws off cash at thinning and at final harvest services the debt; bare cutover ground does not, and the lender can see the difference in the cruise.
• The quality and age of the stand: species, site index, stocking, when it was last thinned, what the product mix will be at harvest rather than what it is today.
• Access, in the recorded sense. A tract reached by a handshake across a neighbour's field is worth less to a lender than the same tract with a recorded easement, because his buyer at foreclosure faces the same gate you do.
• Loan-to-value after the appraisal comes back - and appraisals on timberland come back at numbers owners do not expect more often than on any other rural collateral.
• Term and amortisation. A longer fixed period is a longer bet by the lender and is priced as one.
• Your liquidity and the rest of the balance sheet. Off-farm income, cash reserves and other unencumbered land all reduce the chance the lender ever has to sell the collateral.
• Whether a government guarantee is wrapped around part of the balance. A guaranteed loan is a different risk to the bank and is usually priced as one.
• The relationship: how long you have banked there, what the deposit relationship looks like, whether the institution has been paid back by you before.
• How special-purpose the asset is if the lender ever has to sell it. A single-purpose mill building in a one-mill county is a harder resale than a tract of merchantable pine, and the spread says so.

Spread is also where the differences between institutions show up. A Farm Credit association, a community bank, a national timberland lender and a captive equipment finance company are pricing the same tract or the same skidder against different funding costs, different credit policies and different appetites for the asset. That is the argument for putting the same complete file in front of more than one of them in the same week.

The most common complaint about a land loan is that the rate at the closing table was not the rate on the term sheet. Usually nothing improper happened. Unless the lender wrote a rate lock, what you were shown was that day's benchmark plus his spread, and a benchmark that reprices every business day had six or eight weeks to move while the appraisal, the title work and the survey were done.

Two things can move between quote and closing, and they are worth separating when you ask about it.

The benchmark moved

The ordinary case, and nobody in the room controls it. Ask which benchmark and which term the quote is built on, then read that same published series yourself for the weeks the file is being worked. You will know before the lender calls.

The spread moved

The case worth a question. A spread should not change unless something in the file changed - an appraisal below the contract price, a title or access problem, a weaker balance sheet than the one that was quoted, or the loan being restructured to a different term. If the spread moved and nothing in the file did, ask what changed. It is a fair question and a good lender answers it plainly.

A fixed rate is the benchmark of one particular day, locked in for a stated period. A floating rate is the benchmark of every day, reset on the schedule in the note. Neither is safer in the abstract; they fail in opposite directions. Fixed protects the payment and costs something for that protection. Floating starts where the market is and moves with it, in both directions, while you are drawn.

Most long-term rural land paper is neither purely one nor the other. It is fixed for a stated number of years and then resets against the benchmark of that future day, which means the borrower carries no rate risk for a while and then carries all of it at once, on a date written into the note at closing. Read that reset date and know what it is tied to. It is the single most consequential line in a long land loan and it is easy to miss at signing.

The rate lock

A written commitment to a rate for a stated window, with an expiry. Locks are commonly available on land loans, sometimes at a cost and sometimes not, and they are worth asking about the day the contract is signed rather than the week before closing. Ask three things: how long, what it costs, and what happens if the closing slips past it.

Caps and floors

A floating note can carry a ceiling above which the rate cannot rise, and often carries a floor below which it will not fall. The floor is the lender's protection and it is in most notes; if the ceiling is not there too, that is worth raising.

The prepayment provision

The other half of a fixed rate. A lender who has funded a long fixed loan with a matching long liability has a real cost if you pay it off early, and the note will say how that is settled. Read it before you sign the fixed rate you are pleased with, not on the day you want to refinance it.

A swap to fixed

On mill and larger commercial credit, a floating loan is sometimes paired with a separate agreement through the bank that converts the payment to a fixed one. It is a second contract with its own terms and its own unwind cost, not a feature of the loan, and it should be read as one.

Landowners notice that a Farm Credit association will sometimes hold a long fixed rate on a land loan that the bank in the county seat will not write at all. The reason is not that one institution is more generous than the other. It is that they buy their money in different places.

A community bank funds its loans with deposits. Deposits are short and they can leave. A bank that writes thirty-year fixed-rate paper against money that could walk out the door next quarter has taken on a mismatch its regulator and its board will both have views about, which is why the bank often prefers to write a shorter term, a floating rate, or a loan it can sell into the secondary market. A Farm Credit association takes no deposits at all. The System raises money by selling consolidated debt securities in the national capital markets, at terms running from very short to very long, so an association can fund a long fixed loan with a matching long liability and simply hold it.

That is a structural advantage on long land paper and it is real. It does not make Farm Credit automatically cheaper, and the comparison is not just the rate on the front page. Weigh the origination and appraisal fees, the equity stock a borrower is required to buy, the patronage that may come back later and whether it is a distribution the association has actually made in past years, the prepayment terms, and whether the association will lend on the particular thing you are buying. A bank that knows your county and your buyer at the mill may still be the better answer on a smaller, shorter loan.

The USDA Farm Service Agency is the exception to everything above. Its direct loan rates are not quoted by a loan officer off a benchmark plus a spread. They are programme rates, set administratively by the agency and reset on a published schedule rather than moving day to day, and the same rate applies to every qualifying borrower in the country for that product. There is no spread to negotiate, because there is no spread.

Several distinct direct programmes carry their own rates, and they are not one product with one number.

Farm ownership, direct

For buying or improving farm and forest land, made and serviced by the agency itself rather than by a bank.

Farm operating, direct

The working side: equipment, fuel, inputs, and the operating capital a season needs.

Joint financing

The agency lends alongside a commercial bank or a Farm Credit association on the same purchase, each taking part of the loan, which produces a blended cost across the two notes.

Down payment

A programme aimed at beginning farmers and ranchers and other targeted applicants, pairing a smaller agency loan with a commercial lender's larger one and a required contribution from the buyer.

Emergency loans

For recovery after a designated disaster - the loan a landowner asks about after a tornado has laid down a stand, or after drought or fire. Availability depends on a designation for the county.

Guaranteed loans

Not an agency rate at all. The bank or the association makes the loan and sets the rate under the agency's rules while the agency guarantees part of the balance, so the borrower is back in benchmark-plus-spread territory with a guarantee behind him.

Two things about these programmes matter more than the rate. Direct loans generally require the applicant to be unable to obtain sufficient credit elsewhere on reasonable terms, so this is not a cheaper alternative a bankable borrower can simply choose. And the agency's forms, eligibility tests and turnaround are their own undertaking; the county Farm Service Agency office is where that conversation starts.

Take the benchmark off the table first. Nobody in the building sets it and asking for a better one wastes the meeting. Everything below is genuinely decided by the lender, which means it can be discussed.

• Which benchmark and which term is this quote built on, and what is the spread? Get all three in writing, separately.
• What in my file is driving the spread, and what would move it - a larger deposit, a shorter term, a current cruise and management plan, a recorded easement, moving the deposit relationship?
• Is the rate fixed or floating? If fixed, for how long, and what does it reset against on that date?
• Can the rate be locked, from when to when, at what cost, and what happens if the closing slips past the expiry?
• What are the origination, appraisal, survey, title and recording costs, and which are payable whether or not the loan closes?
• What is the prepayment provision, in dollars and in words, if I refinance or sell in a few years?
• What does the note say about cutting timber - do I need the lender's consent to harvest, and where do the proceeds go?
• What are the release provisions if I sell part of the tract, and what does that do to the rate on the balance?
• Would a government guarantee change this quote, and are you a lender who writes them?

The strongest lever any borrower has is a complete file in front of more than one lender at the same time. A spread is a judgement about uncertainty; a current cruise, a written management plan, recorded access, clean title work and two years of financials remove uncertainty, and the number usually follows. That is also the honest reason competing quotes work - not because lenders undercut each other, but because a file that has already been read by somebody else is a file that has been proved.

Two different questions get asked about rates, and they have different sources. If the question is what today's benchmark is, go to the body that publishes it. If the question is what rural banks are actually charging borrowers - benchmark plus spread, in the aggregate - the Federal Reserve's regional surveys are the closest thing to a public record.

The benchmark publishers

The U.S. Treasury for the daily par yield curve; the Federal Reserve's H.15 release for the same yields alongside the federal funds rate and the bank prime loan series; the Federal Reserve Bank of New York for SOFR each business morning; the Federal Farm Credit Banks Funding Corporation for the System's own funding terms. These are the primary sources. Everything else is a copy.

The Federal Reserve's agricultural credit surveys

The Kansas City Fed's quarterly agricultural credit survey and Agricultural Finance Databook, and the Chicago Fed's AgLetter, ask agricultural banks what they are charging on farm real estate, machinery and operating loans, and publish the answers with loan demand, repayment rates and collateral requirements alongside. Two cautions: these are district surveys, so the numbers describe those districts rather than the South, and they report farm credit rather than timberland specifically.

University analysis

farmdoc daily, from the agricultural economics department at the University of Illinois, publishes working analysis of how farm loan rates have tracked Treasury yields over long periods and how credit conditions behaved through past cycles. Read it for the shape of the cycle, not for this week's quote.

There is no published index of timberland loan rates the way there is for farm real estate. The nearest usable proxy for a Southern landowner is the farm real estate series in the Federal Reserve surveys, read with the knowledge that timberland is a specialty within it and prices differently from row-crop ground.

This page names no rate. Not one - not a benchmark level, not a spread range, not an FSA programme rate. That is a deliberate rule and it is the same rule the rest of this site keeps about prices.

The reason is that everything on this subject decays at a different speed to the page it would be printed on. FSA resets its programme rates on a published schedule. Treasury yields, the Farm Credit System's cost of funds and SOFR reprice every business day. Prime steps whenever the Fed moves. A rate typed here would be wrong within weeks, nothing in the layout would tell a reader it had gone stale, and the reader most likely to be hurt is the one who trusted it - the man who worked out a payment on a tract from a number a website printed a year ago.

So the cards below are the whole answer to “what is the rate today”. Each one goes to the publisher's own page, which is current by construction, and several of them are the exact pages your lender is reading when he builds your quote. Read the same source he does and the conversation changes character: you are no longer being told what the market is, you are checking it.

One more thing this page is not. AXE USA is not a lender, a broker, a mortgage originator or a financial adviser, takes no applications and receives nothing from any institution named here. This is reference writing about how the pricing works. The decision about a particular loan belongs between you, a lender and your own advisers.