Many US midwestern grain farmers will lose money this year after reaping a bumper crop, and the outlook for their future income is bleak.
US farmers harvested some of the largest corn and soybean crops in history this year. Big harvests traditionally weigh on crop prices because of plentiful supply. And those price pressures comes at a time when costs remain persistently high to grow corn and soybeans, the US’s most valuable crops.
That double whammy is hurting farmers. Income will vary per farmer and per state, yet even for producers in top agricultural states such as Illinois, losses could be staggering.
Agricultural economists from the University of Illinois and Ohio State University estimate that the average Illinois farm could make a loss of $30,000 for 2024. Their projections place farm incomes at the lowest level since the 1980s’ farm crisis led to bankruptcies.
The decks are stacked against farmers for 2025 as well. Costs for seed, fertilizer and other inputs rose during 2022, fueled by the Russia-Ukraine war, which also lifted crop prices to record highs.
While crop prices are down nearly 50% from those highs, in part due to a global supply glut, input prices remain elevated. Sterling Smith, an independent commodities researcher, says the national average break-even price for corn is $5.67 a bushel, and $12.72 a bushel for soybeans. Those levels are far above current Chicago Board of Trade most-active futures prices of $4.43 for corn and $9.76 for soybeans.
“We’re looking at this crop, that, when it gets planted, of being a money-loser next year,” Smith says.
And things could look worse for farmers if Donald Trump places tariffs on imports. Trump pledged to impose across-the-board tariffs of 20% on all US imports, with a 60% tariff on Chinese goods. Recently, he advocated for 25% tariffs on goods from Canada and Mexico.
Mexico, Canada and China are the three biggest importers of US agricultural goods, and agriculture is among the US’s biggest export engines. The US Department of Agriculture (USDA) estimates 16% of the US corn harvest and 40% of soybeans are exported. A trade war between those three countries could have both short-term and long-term impacts, Smith says.
Until the first trade war between China and the US in 2018, China was the No 1 destination for US agricultural goods. That came to a halt during the trade war, although China and the US eventually signed an agreement in 2019 to import a set amount of agricultural goods for two years.
During the skirmish, China began diversifying its suppliers, including buying from Brazil. Brazil was already a global grower and exporter of soybeans, but Chinese investment ramped up expansion, Smith says.
“China is not going to put their food supply at risk,” Smith says.
Brazil increased their soybean production by the equivalent of an area the size of the state of Kansas, and some estimates suggest it has as much as 70m acres (28m hectares) of unused pastureland it can plant to crops, the equivalent of two states the size of Iowa.
Brazil can also grow the equivalent of two crops in one year, planting soybeans in September and after that harvest, quickly plant a corn crop, he says, increasing Brazilian corn production. If Brazil continues with its aggressive expansion and the US continues its traditional output, a global situation of habitual oversupply will result, especially for soybeans, Smith says.
“The bigger, long-term problem (for the US) is production gets restructured. Brazil begins to produce a lot more, and suddenly we are pushed out of the export market,” he says, “The bottom line is maybe we have to plant fewer acres.”
An uptick in November’s export sales tracked by USDA suggests importers were stockpiling crops ahead of Trump’s inauguration, while taking advantage of low prices. Tanner Ehmke, lead economist for grains and oilseeds in CoBank’s Knowledge Exchange, an agricultural bank, says after this recent flurry of business, the future for US exports for the coming months is uncertain.
“Where do we go from here? We have record supply coming from South America and at a time when other countries … could be looking for alternatives from the US in the event of a trade war,” he says.
With a poor economic outlook, farmers will scrutinize their budgets ahead of spring planting. Ehmke says to pinch pennies they may in part switch to generic brands for seed and fertilizer and may forgo buying new machinery.
That could have ramifications on publicly traded agriculture companies such as tractor company John Deere, seed company Corteva or fertilizer companies such as Nutrien, which are some of the largest by market capitalization.
Farmers will likely endure operational losses, but a 1980s-style farm crisis is not likely in the offing. Then, over-leverage on land bankrupted many farmers, but the University of Illinois and Ohio State agricultural economists say the difference now is most farmers built financial reserves when incomes were at record levels in 2021 and 2022.
Ehmke agrees. “We’re a long way from an industry-wide crisis,” he says.
