Farm CPA Paul Neiffer says in the short-term it means two things: a focus on government payments and tougher conversations with ag lenders.
Earlier this week, USDA released its estimate for the national average farm case price for corn in the 2025/26 marketing year to be $3.90. That update is down 30¢ from what USDA was saying just last month in July.
What Does This Dip Mean For Farmers’ Financial Footing?
Farm CPA Paul Neiffer says in the short-term it means two things: a focus on government payments and tougher conversations with ag lenders.
“Certainly on the credit side, it means these bankers are going to be having even more talks with their farmers when it comes to renewal,” Neiffer said on AgriTalk in reaction to the USDA report.
With falling prices, there’s a safety net in how the government payments are calculated.
“The drop in prices is bad, but we also have to look at revenue per acre. If these farmers are going to get an extra 20, 30 or 40 bushels per acre, even at $4, that still an extra $70, $80, or $90 of actual cash receipts coming in after harvest,” Neiffer said citing how for every dime drop in the national price for corn, on average $1.2 billion in corn governments goes to corn farmers.
The downside of relying on the government payments is the delay in receiving those funds, which would be next October. Neiffer highlighted in his blog recently how Congress changed signup for ARC and PLC so farmers qualify for whichever program would pay them the higher amount. His estimates show about $15 billion in payments going out next October.
“Across the board, everybody’s going to get some payments, if these prices hold true,” he says. “The majority is going to be related to corn, but then wheat is going to have a large amount of payments, and soybean growers are going to get a decent amount of payments.”
Something to watch is if another Market Facilitation Payment is issued, which would be a more immediate influx of financial support to commodity producers.
“Right now, I can’t really say that tariffs have really caused the price of corn to drop. I mean, corn is dropping because we have too much supply, including from Brazil and Argentina. But that doesn’t mean from a political standpoint, they don’t just say ‘Hey, we’re going to give some money to farmers because we can,’” Neiffer says.
What Farmers Can Weather These Financial Woes The Strongest?
“The farmers who have their own land base are probably in better shape than those farmers who rent 70% to 90% of their acres,” Neiffer says. “That was true back in 2014 through 2019. We know those were the ones that struggled the most.”
Citing its recent survey of ag lenders, Ty Kreitman with the 10th District Federal Reserve says, “About 60% of survey respondents answered that the financial conditions of majority owner-operators were at least modestly stronger than majority renter-operators. Renters have a more limited ability to leverage strength in farmland valuations to improve working capital positions and could be more challenged by weak crop profits.”
Kreitman also says with tightening financial conditions, the demand for credit has steadily increased.
As for the upcoming lending discussions across the countryside between farmers and bankers, Neiffer has three pieces of advice:
1. Be upfront
2. Share your plan
3. Be realistic
“If this is a case where you do have a struggling farmer, and they’re seeing an erosion in their liquidity and working capital and net worth, those are sometimes when you got to have those hard discussions and decide whether this is time to continue or not,” Neiffer says. “We don’t like to see that, but the worst thing that can happen is that you start with $2 million of equity, and you go through this crop and suddenly you’re in a negative situation, and you’ve got to file bankruptcy. Sometimes it’s better to take that hit quicker than later. And I don’t like having those conversations, but I’ve had those conversations in the past. So, that’s something you got to be very, very cautious of.”
Neiffer points to a provision of the recent One Big Beautiful Bill Act, which the banking industry had included to reduce the taxability of interest income.
“They’re going to get a 25% reduction. Now, it isn’t as good as it sounds, because they have to reduce the payment that they make related to that income. So, effectively, farmers might get a 20 to 25 basis point reduction in their loan dealing with the bank. This is not a Farm Credit bank. This is a regular bank like a Wells Fargo or your local community bank.”
Neiffer says he’s watching for health checks of rural banks but doesn’t see widespread caution yet.
“Rural banks are still in pretty good shape, because you got to remember, yes, the crop side is struggling, but the livestock side is really doing very, very well,” he says. “If prices continue to be low or go lower for the next year, then you’re certainly going to see some of those banks start to struggle.”
In the second quarter, the 10th District of the Federal Reserve reports its regular survey showed a steady decline at a similar pace to recent quarters for farm income and loan repayment rates.
“Despite ongoing strength in the cattle sector, farm finances in the region have tightened considerably as profit opportunities for crop producers remained limited,” said Kreitman in his recent report.
AG WEB