Farmers Need ‘Significant’ Federal Help to Survive Drop in Income, Say Senators

“One in five farmers could be pushed out of business by the sharp drop in farm income this year,” said Mississippi Sen. Cindy Hyde-Smith at a Senate hearing on disaster aid, and Arkansas Sen. John Boozman asked how rural America could survive the combination of high production costs and lower commodity prices without “significant help” from the government.

“It’s really dire in farm country right now,” said Boozman, with crop producers suffering in particular, although livestock prices have been stronger than expected. Federal intervention is needed because bankers are becoming reluctant to loan money to growers for 2025 crops, said the senators.

With action on the new farm bill unlikely until the new year and with net farm income falling for the second year in a row, lawmakers from farm states were calling for financial aid from the government as a stopgap measure this year. A House bill, for example, would provide an estimated $21 billion for producers of the eight major U.S. crops, with payments available for other crops.

Although the USDA has forecast a 25% plunge this year in net farm income, a gauge of profitability, it still would be the fourth highest on record, at $116 billion, and 15% above the 10-year average. The three top years for farm income were 2021, 2022, and 2023. The USDA income estimates apply to the farm sector as a whole and do not represent the standing of individual producers.

“For the high cost and the interest rates, I mean, we’re expected to lose 20% of good producers,” said Hyde-Smith. “So I do think this is a true emergency and a crisis for our farmers.”

“As Congress identifies [and] makes the hard choices about disaster funding as well as other economic assistance in the wake of fiscal conservatism, we know that we’ve got to look deep into which farmers are struggling,” replied USDA deputy secretary Xochitl Torres Small. “Recognize that I have spoken with farmers as well who are struggling, particularly when it comes to input costs.”

Boozman, who’s in line to become Senate Agriculture Committee chair, said higher-than-average farm income “doesn’t mean anything now” in the face of high interest rates and high costs. “How can rural America endure this without significant help?”

Torres Small said ag bankers have reported concerns about the financial strength of some row crop and specialty crop farmers, but she said loan repayment rates were strong among other producers. “So we do know that at the same time, there are opportunities for farmers out there.”

Nationwide, ag bankers reported a more than 40% growth in the volume of new operating loans during the summer compared to the third quarter of 2023, said the Kansas City Federal Reserve in late October. “Weak profit margins in the crop sector continued to weigh on the farm economy even as prospects in the cattle industry remained strong. … Farm operating debt has grown at a rapid pace alongside lower crop prices and persistently high production costs, while lending activity for other types of loans has softened.”

Interest rates on farm loans averaged slightly more than 8% during the third quarter, which preceded rate cuts by the Federal Reserve.

Bankers in the central Plains reported a slight increase in the rate of problem loans during the third quarter, said the Kansas City Fed on Monday. Roughly 6% of loan portfolios were on the “watch list” at banks participating in the survey.

In the Midwest, “agricultural credit conditions weakened on balance in the third quarter of 2024 relative to a year earlier,” said the Chicago Federal Reserve last week. “Forty-two percent of the responding bankers predicted a lower volume of farm loan repayments over the next three to six months compared with a year earlier. … Unsurprisingly, given income expectations, forced sales or liquidations of farm assets owned by financially distressed farmers were anticipated to rise in the next three to six months relative to a year ago.”