The current landscape of the U.S. farm economy is increasingly challenging for farmers, particularly those engaged in row crop production. As crop prices continue to decline, the financial pressures on farmers are intensifying, impacting their overall profitability and sustainability. This summary examines the key factors influencing this declining farm economy, including commodity prices, rising production expenses, and market dynamics.
Declining Commodity Prices
Over the past few years, farmers have experienced a substantial decline in commodity prices from the highs of 2021 and 2022, when strong global demand and supply chain disruptions from geopolitical tensions drove prices up. For instance, corn prices, which peaked at over $7 per bushel, have now dropped to around $4, representing a 54% decline. Similarly, soybean prices have plummeted from $15 to under $10 per bushel (a 58% decrease), while wheat and cotton have fallen by 51% and 42%, respectively. One of the most pressing issues contributing to this downturn is the shift in export demand. China—formerly the largest importer of U.S. soybeans—has pivoted towards South America, particularly Brazil, where farmers are producing record crops at competitive prices.
Rising Production Expenses
While commodity prices are in freefall, production expenses remain stubbornly high. Farmers are projected to incur record production costs of approximately $467 billion in 2025, nearly $12 billion more than in 2024 and significantly above previous five- and ten-year averages. This squeezes farm profitability and limits the capacity for reinvestment or reserve building.
Breakdown of Key Expenses
Seeds: At approximately $27.2 billion for 2025, seed costs constitute around 6% of total expenses. While modern seed technologies can yield higher returns, they come at an elevated cost. Reducing seed quality is fraught with risks, often leading to lower yields.
Crop Protection: Projections indicate that herbicide, fungicide, and insecticide costs will hit $20.6 billion or about 4% of total expenses. Dependence on imported active ingredients means that U.S. farmers are exposed to global supply chain vulnerabilities.
Energy Costs: Energy costs are projected to reach $15.8 billion in 2025, about 3% of total expenses. Variations in global oil prices impact essential inputs like diesel and propane, which are critical during planting and harvest.
Machinery and Repairs: Machinery upkeep will likely cost farmers about $22.2 billion. Higher repair costs arise as many growers are delaying capital expenditures on new equipment due to tighter margins.
Fertilizer: The fertilizer market remains volatile; while prices have fallen from their pandemic highs, they are still above pre-2021 levels. In 2025, fertilizer costs are expected to total $33.5 billion, indicating one of the largest single inputs for growers.
Land Costs: With increasing demand, cash rents and land values have reached new highs. Rent expenses alone are predicted to reach $15.2 billion in 2025, putting immense pressure on cash flows.
Interest Rates: Rising interest rates pose an additional challenge as they increase the cost of both short-term operating loans and long-term investments. Interest payments are anticipated to soar to $33.1 billion, accounting for approximately 7% of total costs.
- Labor Costs: Despite increased mechanization, labor remains a critical resource during planting and harvesting seasons. Labor costs are expected to reach $53.7 billion in 2025, making labor the second-largest expense after feed.
Profitability Challenges
The culmination of decreasing crop prices and relentless production costs has led to a perilous profitability outlook for many row crop producers. For instance, projections indicate that common crops are operating at a loss per acre; cotton could be down by nearly $379, while corn and soybeans are projected at -$169.31 and -$114.15, respectively. This cost-price squeeze curtails farmers’ ability to meet debt obligations, invest in their operations, or save for downturns.
Government Support and Future Outlook
To mitigate these challenges, programs like Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) offer some stability, but they were not designed to combat persistent inflation in costs. The One Big Beautiful Bill Act (OBBBA) attempts to enhance protections through raised reference prices and expanded crop insurance options, although benefits will not be realized until late 2026. Consequently, farmers are left navigating these economic pressures in the interim.
Furthermore, while farm bankruptcies remain relatively stable compared to historical data, there is an uptick in filings, suggesting increasing financial distress among farmers. Over 140,000 farms have vanished from the agricultural landscape since 2017, with additional losses highlighting an industry in transition.
Concluding Thoughts
As the farm economy grapples with both declining commodity prices and rising costs, the sustainability of many farms hangs in the balance. Farmers require not just short-term solutions but a data-driven, strategic approach to ensure long-term resilience. It will be essential for stakeholders—policymakers, industry leaders, and farmers—to collaborate effectively to navigate this complex landscape and protect the future of U.S. agriculture. The situation calls for immediate attention to ensure a robust agricultural sector can continue to thrive amidst economic volatility.
