"Crop prices surged during the pandemic, then tumbled from 2022 through 2024 and regained only a modest amount of ground this year. But costs didn't come down, and President Donald Trump's trade war prompted China to stop buying U.S. soybeans. The trends converged into a "perfect storm" this year, but date back to the middle of the last decade, according to Bernard Yaros, lead U.S. economist at Oxford Economics."
"The Federal Reserve's aggressive rate-hiking cycle in 2022 and 2023 to fight inflation added to farmers' costs as rates spiked on agricultural loans to finance routine expenses, capital spending, and farmland purchases, Yaros added. Today, the result is a giant K seared across the agricultural sector. Meanwhile, farm bankruptcies are heading back up, with the fastest growth in the top soybean-producing states, according to Yaros."
"To be sure, the federal government has stepped up support for farmers. The One Big Beautiful Bill Act that was signed in July included about $66 billion in agriculture-focused spending. The vast majority, about $59 billion, is earmarked for farm safety-net enhancements. The Agriculture Department has estimated that real net farm incomes will jump by nearly 40% this year after two years of declines. But about three-quarters of that growth is due to government payments, Yaros noted."
Crop prices soared during the pandemic, fell from 2022 to 2024, and have only modestly recovered while production costs remained elevated. Fuel, fertilizer, machinery and interest expenses on agricultural loans increased, squeezing farm margins. China halted many soybean purchases after trade tensions, reducing export demand. Farm bankruptcies are rising, particularly in major soybean states. The federal government authorized roughly $66 billion in agriculture-focused spending, largely safety-net enhancements, which explains most of the projected nearly 40% jump in real net farm incomes this year.
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