If you were hoping for a break on borrowing costs or input prices heading into 2027, the latest Farm Journal Ag Economists’ Monthly Monitor isn’t offering much comfort. The July survey shows the panel expects both to stay elevated, or even grow worse, putting fresh pressure on margins that are already stretched thin across the row-crop sector.
Out of the 15 economists that responded to the latest survey:
- 11 economists say they expect the average interest rate on ag operating loans to be slightly higher in 2027 than in 2026
- No economist is forecasting a decline of any size
- 4 expect rates to hold steady
But the message from more than two-thirds of the group is the same: financing a crop is about to get more expensive, not less.
Input costs aren’t offering any offset. Asked whether fertilizer, seed and chemical prices will adjust downward in response to farm margin compression heading into the 2027 crop year:
- 69% of economists said prices will stay flat to elevated
- 19% expect prices to keep climbing
- Not a single respondent forecast a significant, greater-than-10% drop in input costs
“Farm profitability today isn’t so much about production, as it is about input costs that remain stubbornly high,” one economist wrote. “If costs can be constrained and prices increase even incrementally, farm profits can rise quickly.”
A Bright Spot: Short-Term Sentiment is Actually Improving
For all the concern over rates and input costs, the panel’s read on where the ag economy stands right now is more encouraging than it’s been in a while. Fifty-six percent of economists say the current state of the U.S. ag economy is somewhat better off than it was just one month ago, and not a single respondent said conditions are worse off. Another 38% say things are unchanged, meaning the entire panel views the month-over-month trend as flat or improving.
The year-over-year comparison is more mixed, with 37% of the 15 who responded saying the economy is somewhat worse off than a year ago and 37% calling it unchanged, but a quarter of the panel still sees improvement.
Looking ahead, the panel’s 12-month outlook leans optimistic as well. Nearly 44% of economists expect the ag economy to be somewhat better off a year from now, the single largest response of the five options, compared with less than 19% who expect it to be somewhat worse off.
No economist in the July survey chose “much worse off” for any of the three comparisons, a sign that while the panel isn’t ignoring the cost and credit pressures ahead, few see the downturn deepening into something more severe.
Debt Stress is the Indicator to Watch
When asked which single economic indicator they’re monitoring most closely to gauge the health of the ag economy, the answers converged on one theme: how well farmers are servicing their debt. Delinquency and default rates on operating loans, repayment behavior on nontraditional credit lines, and the level of farm debt coming out of fall harvest all came up repeatedly.
“The ability to service loans is one of the primary indicators of how the ag economy is actually doing,” one economist said. Another put it more bluntly, calling loan delinquency data “a better measure of financial stress than bankruptcies,” since it offers an early read on lender expectations before a farm operation reaches a breaking point.
An Ag Lender’s View: Stress is Building, But It’s Not “Wholesale”
Alan Hoskins, president and national sales director at American Farm Mortgage and Financial Services, says his own loan book is seeing early signs of the same trend the economists are watching.
“While I would not categorize it as ‘wholesale increases’ across the board, there is a definite trend in increased repayment stress,” Hoskins says. “I do concur with the economists in that it definitely could be a leading indicator in the data’s direction.”
As for how that translates into underwriting for 2027, tighter terms, more collateral, more producers scaled back or declined, Hoskins says it’s simply too early to say.
“Given where we are in the 2026 crop cycle, it is still slightly early to determine how underwriting procedures may change for 2027,” he says. “I anticipate that direction will have much more clarity as we get to the middle part of harvest and have a better understanding of how profitability may trend.”
Farm Aid Payments: A Lifeline That May Also Be Delaying the Reckoning
There’s been renewed debate on role ad hoc federal payments are playing in the current downturn.
This month’s survey asked to what extent ongoing adhoc federal payments are the primary factor preventing U.S. row crop production costs from adjusting to a level that is competitive with South American producers.
- 60% of economists who responded either agreed or strongly agreed that ongoing ad hoc federal payments are the primary factor preventing U.S. row-crop production costs from adjusting to a level competitive with South American producers.
- Only 27% disagreed or strongly disagreed.
That skepticism carried into how economists think a new aid package would actually work.
Asked about the most significant market impact of the reported $12 billion to $20 billion ad hoc farm aid package being discussed in Congress:
- 43% said it would mostly preserve working capital and farm equity for producers facing high input costs, essentially a bridge, not a fix.
- But another 36% said the bigger effect would be further capitalization of that money into farmland values and cash rents
- 21% said it would delay market-clearing supply adjustments, like the acreage shifts a tighter margin environment would otherwise force.
None of the panel expects aid payments to meaningfully strengthen the U.S. competitive position against rivals like Brazil.
What happens to farm aid dollars once they hit a producer’s balance sheet? It’s a question the economists themselves raised. Hoskins says it depends heavily on the operation’s financial management.
“I believe the better managers utilize it to ensure adequate working capital is present to cover upcoming anticipated costs or required capital investments,” he says, adding that some producers use the payments to temporarily pay down operating debt and reduce interest costs until the funds are needed elsewhere.
For operators with tighter working capital, he says, the money tends to serve a different purpose: catching up on expenses that would otherwise have gone delinquent.
That distinction, Hoskins says, points to one of the more encouraging trends he’s observed as margins have compressed.
“There is significantly more thought being given to the true financial effect of capital expenditures prior to them being made,” he says.
Whether it’s equipment, irrigation or grain storage, he says operators are taking a harder look at the true benefit an asset brings to the operation before spending the money to acquire it.
Corn Tops the List for Negative Returns Risk in 2027
Corn drew the most concern when economists were asked which crop faces the highest probability of negative net returns in 2027, with 38% naming corn. That came in ahead of cotton at 25% and wheat at 19%.
Notably, not a single economist pointed to soybeans. One respondent, however, wasn’t ready to single out just one crop: “They all have high probability of negative returns.”
“It’s not that the world is short of soybeans at this point, although if El Nino cuts South America’s crop, it could be, but it’s more the market has to reshuffle the supplies,” says Arlan Suderman, chief commodities economist with StoneX Group. “And if that demand is coming, the United States has to re-shuffle the supplies that South America has to make the world demand met.”
Corn’s path to higher prices, he says, is less certain and hinges on pieces still falling into place: how long the war in the Black Sea region persists, and how the fertilizer story develops heading into next year.
“Things are aligning in that direction, but they’re still not locked in place,” says Suderman.
What to Watch Over the Next 12 Months
Asked to name the two most important factors driving agriculture’s economic health over the next year, economists’ answers clustered around three themes, including:
- The input-cost-versus-commodity-price squeeze
- Weather and yield uncertainty tied to a potential El Niño pattern
- Geopolitical risk, particularly the war involving Iran and its ripple effects on energy, fuel and fertilizer costs.
“The evolution of farm commodity prices and input prices” will matter more than government assistance, one economist wrote, adding that “relatively modest movements in prices are likely to have a larger impact on the sector than are government assistance programs.”
Another economist flagged the war’s reach into farm country directly: the conflict “as it relates to fuel/diesel, fertilizer, and borrowing costs” alongside the prospect of continued direct government payments.
Several economists also pointed to the upcoming harvest as a pivot point. One noted the outcome of 2026 crop production and income prospects for major U.S. crops this summer and fall will be a key driver, layered on top of how the Iran conflict moves world energy markets with any volatility there expected to carry over into U.S. commodity prices and farm income.
