First Look at the Farm Economy in 2025 – 10 Observations

The USDA released its latest estimates of net farm income and other farm financial measures earlier this month. The data included the first look at 2025 conditions. Between the jump in government payments and the contrast in crop and livestock profitability, summarizing the state of the farm economy is a challenge. To navigate the layers of nuance, we’re sharing the 10 most important insights.

#1. Historically high net farm income

The number that has caused a lot of head-scratching and double-takes is net farm income estimated at $180b. The increase from 2024 wasn’t a surprise given the announced ad hoc programs, but 2025 income is well above the long-run average ($107b) and among some of the highest historical observations.

#2. Source of change

What are the sources of change in net farm income between 2024 and 2025? As expected, a $32.3b jump in government payments accounts for the lion’s share of the increase. However, lower production expenses would increase farm income by $14b. Currently, a lower value of production is expected for both crop and livestock production.

#3. & #4. Tale of two farm economies – continued

The U.S. farm economy is a tale of two diverging sectors: crop and livestock. This story is expected to continue through 2025.

In 2025, conditions for corn and soybeans will be considerably below the long-run average. Furthermore, these are the lowest corn and soybean observations going back to 2010. More pointedly, corn and soybean returns in 2024 and 2025 are lower than in the previous margin squeeze (2014 to 2017) and during the last trade war (2018 to 2019). Cotton and wheat returns look to improve year-over-year but remain at or below the long-run average.

Contrast the crop data with hog producers who have struggled but will see considerable improvement in 2025. However, beef and dairy had strong returns in 2024, and those are expected to be even stronger in 2025.  

#5. Regional difference

The same analysis can be applied to consider conditions geographically. The livestock and crop divergence shows up when comparing the Heartland region (think Corn Belt) with the North Great Plains and Prairie Gateway (central and southern plains) (Map of USDA regions here). During the last farm economy cycle, there was considerable correlation among these regions, but that isn’t the case today.

The Heartland region enjoyed exceptionally high income between 2020 and 2022, but 2025 is setting up to be the second consecutive year of low returns. To that point, current conditions are some of the worst experienced in the region since 2010.

#6. Historically high direct farm payments

An estimated $42b in direct payments is expected in 2025. This is a sharp uptick from the $9.6b worth in 2024 but is also historically high. By crossing the $40b threshold, 2025 payments will be ahead of inflation-adjusted levels from the 1980s, late 1990s, and early 2000s. Only in 2020 were direct payments higher ($55.5b in 2025 dollars).

#7. Outsized ad hoc payments

Since 2018, MFP and ad hoc programs have accounted for an average of 72% of total direct payments. The unspoken challenge around passing a new farm bill might be that key programs – namely ARC and PLC – haven’t been effective in recent years. And their effectiveness doesn’t look to improve: 84% of total direct payments in 2025 will be ad hoc.

How unusual has recent ad hoc spending been? Since 2020, total spending was more than $121b. In the preceding 22 years (1998 to 2019), total ad hoc spending was just $91b.

#8. & #9. Farm debt

Farm real estate debt is expected to increase in 2025. That said, nonreal estate debt is still trending sideways, which has been the case since 2010.

Perhaps the most cited farm financial crisis indicator – the farm debt-to-asset ratio – is expected to turn slightly lower and remain on the low end of historical observations. However, as we warned a year ago, the measure is heavily influenced by changing asset value. As such, the farm debt-to-asset ratio is probably a lagging indicator.

#10. Working capital – stable but lower

Farm balance sheets will have slightly less working capital at the end of 2025. Measured as a share of the value of farm production, levels are expected to be 20%. While conditions are below the long-run average (23%) and have decreased since 2021 (25%), the ratio is expected to remain above 2015 to 2019 levels. During that stretch, the working capital ratio was 16%.

EDITOR’S TAKE:

The farm economy is always difficult to summarize. Conditions in 2024 and 2025 make that even more challenging. For corn and soybean producers in the Heartland regions, aggregate measures overstate faced conditions. This could especially be true for financial ratios, such as working capital. On the other hand, some livestock sectors are experiencing very good conditions, and the national summaries understate the magnitude of 2024 and 2025 performance.

The 2025 estimates are very early. In August, we expect another update, which will dial in cost and balance sheet details from 2024. Of course, any change in commodity prices and production will also be considered.

The dichotomy between crop and livestock returns and another year of historically high ad hoc payments will lead to several – perhaps conflicting – narratives about the farm economy.

Although conditions could change during the upcoming growing season, keep in mind that the overall net farm income is estimated to be a record high at $180 billion. So, no matter the source, farmers/ranchers appear to be in for a solid year. They will certainly need some tax write offs which means they will invest in equipment, buildings and, of course, trucks. Be sure to put your inventory on AgTruckTrader.com® if you haven’t done so already. Make certain to keep the inventory fresh, check it on a regular basis to be sure you’re up-to-date!