The US economy is declining. How does this affect farmers? How are they dealing with it?

During the past few years, the US farm economy has benefited from higher commodity prices. However, as we move into 2024, accelerated inflation, rising interest rates, increased cost in labor, lack of labor resources, and now lower commodity prices are having major economic impacts on the US farming sector. We spoke with several farmers across the US to get their input on how the current economy is affecting them and what strategies are successful in managing these business cycles.

Ty Brown, Indiana

Ty Brown, who grows corn, wheat, soybeans, and cover crops in Indiana gives us his insight. “When we face downturns in the ag economy as we are now, there are a several mindsets to maintain. First, focus on the fundamentals. Too often the mindset of farmers is they do not want to change when markets change. Wishful thinking that the markets will go back to high prices and problems will go away. Sometimes you have to do the uncomfortable and take a non-emotional assessment of your operation. The answers are there. But we have to be willing to adapt and be agile.”
Ty points out it’s important to be very strategic in navigating not only the good times but also the downturns in the ag economy. The first topic revolves around grain marketing. “Having our own grain storage puts us in a stronger position for better marketing and more revenue from our crops.” Ty relates the first investments made earlier in his farming career was in grain storage. Strong relationships with grain marketers, along with contracting ahead in the market secures more revenue in volatile times. “Being in physical control of your grain allows you more flexibility to maximize your revenue, and in the long run having grain storage and handling allows that.”
Simply putting our head in the sand and making no investment during downturns is not always good. When we look at rising input costs, rising labor costs, and higher interest rates. “In low interest rate markets, being asset rich is good. But when we see higher interest rates, the investments must be made that give us a true return on that investment. One major issue the entire country is facing is available labor. If an investment is made to reduce the amount of labor yet still get the work done efficiently, that is positive return. Be smart about it. An example, moving to one higher speed planter versus two planters. You eliminate a tractor, a person in the tractor, and an additional planter. One investment that we have made on the farm this year is in a Transformer which with our crop rotation will significantly reduce chemical costs.”

Keeping the farm agile is an important long-term strategy. “There is a big difference on what can be afforded at 3% versus 8% interest. Any asset that is unproductive on the farm should be considered for liquidating. Do you have an old tractor or piece of machinery that you aren’t using? If you aren’t using it, liquidate it. It’s costing you money if there is no benefit coming from that investment.” Another thing Ty discusses with agility is diversifying income. “One big difference today from the 1980’s farm crisis in the US is the skill set and education of todays younger farmers. Many have gone to college, gotten degrees in some area of ag, and can use these skills to build an off-farm business. Agronomy consulting, grain marketing, even doing contractor work can add additional income in low markets. One big thing we are looking at and pursuing is growing non-GMO crops along with reducing chemicals used. Not only can we market for a higher grain price, but also have added benefits of lower chemical costs. It’s all about margin,” Ty adds.

Kam Koompin, Idaho

Kam Koompin, a potato and cereal grain farmer in Idaho, also gives insights on this topic as the western US has different cropping than other parts of the nation but yet similarities in how the current economic times affect farmers in his region. “Our markets are somewhat different as we concentrate with potatoes being our main crop. How we rotate our other crops like wheat, barley, corn, and mustard is based on our potatoes”, Kam explains. “In our market, with the crops we grow, we have had three good years with prices. 2024 going into 2025 will be different as all crop prices in our area have gone down. However, there are things that we do as a long-term plan for these cycles”.

In planning for these cycles, there are several topics that must be ongoing as long-term goals in the farming operation. A topic that Kam discusses is interest rates. “History repeats itself. For the Gen X and Millennial generation, we have for the most part always seen low interest rates. Over the years we have operated at 3-4% interest rates. That’s allowed us to grow our operation. Now, with higher interest rates pushing 7-8% for operating lines and investments, it’s somewhat of a new territory and we have to be more strategic. As we talk of history repeating itself, it’s important to talk with the previous generations of farmers and how they navigated through, especially the 1980’s, when we were at double digit interest rates.”
With the topic of interest rates, how history repeats itself, Kam discusses how long-term strategy in investments has aided the family operation. “Preserve the good times. You will need that liquidity for the future. Invest in things that provide true return on investment and add efficiency to your operation. There are a lot of things we can invest in, such as all of this data generating, but we have to ask ourselves, does it really truly have a payback? With our crop rotations we have invested into potato storage which gives us control of our marketing, plus we are looking to invest more into grain storage to give us more agility in marketing our cereal crops. Having that control just allows us to secure better returns on our crops, and that is a true return on investment for us. Investment in making the farm more efficient for us has been key for us, too. We have continued to evolve all aspects of our operation, from tillage, to seeding, to our potato production, to crop storage. Each step year after year keeps us in a good position for such times in the economy as we see now. Keep it simple and efficient.”
“Whereas many farming regions are having problems with the cost and availability of labor, we have been fortunate here”, Kam explains. “With our crop rotations, we keep busy all year. We manage a lot of irrigation plus from post-harvest to the next planting season we are moving crops to processing. This allows us to keep more full-time labor with a steady year around workflow. Especially with potatoes plus irrigation, there is a lot of work during and after season.”

John Wilson, Ohio 

John Wilson, who farms corn and soybeans in Ohio, adds to this discussion. “One thing to point out in downturns, as well as high markets, position yourself to be in control. When times are good, take those profits and invest into buying land. If you don’t have secured land, you are at risk. Without land, you don’t farm. Simple as that. This comes over time, however, but must be the vision and goal year after year as your farm expands” John explains.
As we discuss more into the topic of being in control, it goes much further than securing land. “Being in control includes many aspects of a farming business. Grain storage allows you to be in control of your grain marketing. Being able to control the critical points in your operation such as fertility management, planting and spraying. I’ve experienced over the years where one wrong move by a contractor has cost me yield, which costs me revenue. In down markets this can crush a farming operation. Make the investment into being as self-sustainable as possible” John says.
“Invest where it makes sense. We are a family operation. As we mentioned earlier, we invest in land. Many of our investments are based on the lack of labor that’s available beyond our family. We look at productive machinery that can capitalize each hour in the field and maintain high efficiency. We talked about earlier investments into grain storage. This allows us to obtain better basis prices. These all are positive returns on investments in our operation and are strategic as we will always have highs and lows in the farm economy. And invest in your yields. In a down farm economy don’t short yourself on maximum yield potential. Trying to save money by investing less into yield will hurt you in the long run.”