After several years of fairly flat land values in the state, land values have increased substantially. USDA Agricultural Land Values shows that the Wisconsin average value for farm real estate was $6,800 in 2024, up 40% from $4,850 in 2020. In addition, many farms refinanced loans to lock in low interest rates before rates began to increase in 2022. As a result, balance sheets are generally solid for the “average” farm. However, two types of farms are at risk – highly leveraged farms with relatively little equity and those renting a large portion of their land of land. The “average” farm can weather negative margins in the short-term by using equity, but loan payments and rents have to be paid. Recent price declines for corn and soybeans mean that margins in 2024 will not be very good and if 2025 margins are also poor, eventually these conditions will catch up to many farms. Thus far, agricultural banks in the region have not reported spikes in loan repayment problems, nor have federal Chapter 12 farm bankruptcy filings jumped in the state, but the situation bears monitoring.
Policy Uncertainty
In many years, federal commodity support programs help farms. However, it is unclear what, if any, support farmers can expect from the lame duck Congress and president or the new Congress and president. There have been some movements for ad hoc legislation or a new Farm Bill, but nothing is certain. Furthermore, the USDA prices projections for 2025 assume a policy status quo. If a trade war occurs or policies supporting RFS are changed, these demand shocks will likely affect price expectations for 2025. Until policy clarity emerges, Wisconsin farmers should plan for tight and negative margins for corn and soybeans as they make plans for 2025.
What’s a Farmer to Do?
Some of my previous posts have provided suggestions for Ways to Reduce Borrowing for Your Farm and using Marketing Assistance Loans to Manage Interest Costs. Multiple UW Extension faculty and staff also provided several suggestions for improving crop management in Balancing Sustainability and Innovation in Wisconsin Agriculture and the associated YouTube Channel. Beyond these resources and other materials on the internet, farmers should rely on their social networks for ideas and suggestions of ways to work through these thins margins. Agriculture has gone through periods of tight margins before. Experienced farmers and other agricultural professionals are valuable sources of information on strategies and specific tactics that can be used to make it through such times and these connections can be valuable for everyone.
Source : .wisc.edu