Farmers Face Financial Squeeze as Input Costs Surge and Credit Demand Soars

Land O’Lakes CEO Beth Ford painted a grim picture of the financial pressures facing U.S. farmers, highlighting a surge in input costs and credit demand. Since February, input costs have risen by $15 billion, with diesel prices roughly doubling, forcing farmers to borrow heavily against next year’s crop before finishing this year’s harvest. Reserve loans at Land O’Lakes’ financing business have skyrocketed from $100 million last year to over $1 billion this year, signaling severe strain on farm operating balance sheets.

Ford noted that farmers are struggling to absorb these additional expenses during harvest season, with diesel being the most acute issue. Some operators have mitigated risks by pre-buying fuel or installing on-farm tanks. The rising costs are also impacting trucking, as owner-operators park their vehicles due to unaffordable fuel prices, reducing freight capacity across the industry.

Credit demand is surging as farmers face rising interest rates and declining equity. Ford emphasized that higher corn and soybean prices may help some operations, but only those that haven’t already forward-sold their crop. Land values, up about 45% in recent years, have provided collateral for borrowing, but the changing ownership landscape, with financial buyers replacing local farmers, poses long-term risks.

Trade remains a critical factor, with about 20% of U.S. agricultural production exported. Ford praised the current administration’s active trade agenda but noted the opacity of agreements, particularly with China. She also highlighted Brazil’s growing competitive edge due to its triple-cropping capabilities and investments in infrastructure and research.