Declining prices and rising costs create a critical planning landscape for agriculture.
For agricultural producers, careful planning has always been essential to staying profitable—or even breaking even. But heading into 2025, preparation will be more crucial than ever due to a convergence of unfavorable economic conditions.
Kevin Kim, Will Maples, and Brian Mills, agricultural economists with the Mississippi State University Extension Service, are working to help producers navigate what is shaping up to be a financially difficult year across the U.S. agriculture sector.
“We’re at a point where if producers don’t start doing something to prepare, they’re going to be in trouble,” Maples said in a recent MSU news release. “The time to start planning is now.”
To address these challenges, MSU Extension has released the “Farm Financial Analysis Series,” a set of five publications covering topics such as farm financial health, balance sheets, cash flow statements, and managing finances in turbulent times.
Margins are already tightening as commodity prices decline from highs seen between 2021 and 2023. According to USDA data, September prices for corn dropped 23% from a year earlier to $3.98 per bushel. Soybean prices fell 29% to $10.20 per bushel, and cotton prices declined 21% to 60 cents per pound.
“This is a very significant amount, but corn and soybean prices were at record-high levels in 2020 and 2021,” Kim said. “Those prices are still above long-term averages. The difference here is production expenses increased way too much.”
Mills highlighted that the costs of inputs—seed, fertilizer, fuel, and labor—rose alongside commodity values.
“Inputs always come down slower than prices, so when we saw prices fall this year and margins were already tight, we knew farms were going to become less profitable,” Mills said. “When you have high inputs and low crop prices, it’s a lot riskier for banks to loan on something that they think might not make a profit.”
Production expenses remain well above historical averages, Kim added, which could make it difficult for many row crop growers to cover their production costs in 2025, even with futures markets forecasting slight price increases.
Relief could come from a U.S. House bill introduced in October by Rep. Trent Kelly, R-Miss. The Farmer Assistance and Revenue Mitigation Act of 2024 (FARM Act) proposes covering up to 60% of net losses incurred by producers.
“The initial draft proposal was for the program to cover up to 60% of net losses that a producer incurred for this year,” Kim said. “So if a producer loses $100 per acre this year, then this program would give $60 per acre back.”
The broader economic health of rural communities also faces ripple effects from these agricultural challenges.
“There are rural communities around farms that are based on how well those farms are doing,” Mills said. “We think about just the farm, but there’s still the bank, there’s still the retailer, there’s the machinery dealer and grain buyers, so when the farm is suffering, these rural communities are suffering as well.”
The supply side of agriculture has also contributed to price instability, particularly with record soybean crops and high corn yields. International competition and weaker export markets have further suppressed prices.
“We’ve got a record soybean crop this year, and we’ve had two straight years of good corn crops,” Maples said. “On the demand side, export markets are really weak this year. We’re not selling near as many soybeans to China as we were because of competition from Brazil, which is also expected to have record soybean and corn crops.”
These tight margins could lead to further consolidation in agriculture.
“At current prices, farms are going to be hit pretty hard over the next few years. You’re likely going to lose some producers,” Maples said. “Some producers are going to retire, and it will be harder for younger folks to enter the business. Some growers may have to give up some rental land and get small enough to decrease their rental costs.
“Many of the remaining farms are going to get bigger, and there’s going to be as much farming taking place as there has been,” Maples added. “It’s just going to be fewer farmers doing it.”
Kim suggested that producers consider selling unused assets to address immediate financial obligations.
“If you don’t pay your immediate financial obligations, you can get into bigger trouble,” he said. “If you have unused assets like machinery and equipment and there is value for them, we always recommend you sell those to help pay off debt.”
While farm loan interest rates are expected to decrease slightly in 2025, Kim noted they will remain high compared to 2021 levels.
“The most recent farm operating loan interest rate is 8.83%, and for the farmland real estate loans, it’s 8.04%,” Kim said. “2021 numbers were 4 to 5%, so the rates have almost doubled with the federal fund rate hike. The rates will go down, but it won’t go down as fast as it has increased in the last three years.”
Agricultural land values have provided some stability, with USDA forecasting a 3.5% increase in cropland value in 2024 to $3,880 per acre.
For producers seeking new loans, the financial outlook remains challenging.
“We’ve heard from bankers who are worried about having to turn borrowers away,” Maples said. “A lot of loans for inputs are held by the retailers, and manufacturers of those products are also concerned and hesitant to give more of those loans out because they don’t know if they’ll be repaid.”
Mills recommended that producers maintain meticulous financial records to improve their chances with lenders.
“The biggest thing is going to be putting together a list of estimates on your budgets, showing the bank that you have a path forward to be profitable,” Mills said. “The more detailed information and plans you have for your farm, the better you will be able to negotiate with the bank and reduce the chance of them telling you no.”
The 2025 Mississippi Agricultural Outlook Conference on Jan. 14 at the Mill Conference Center in Starkville will provide more insights into economic conditions in agriculture. Hosted by MSU Extension and the Mississippi Agricultural and Forestry Experiment Station, the event will offer updates and strategies for producers.
For more information, visit the MSU Extension Farm Financial Analysis Series at MSU Extension Publications.
