Iowa Farm Bureau economist Christopher Pudenz says the tough agricultural economy continues to weigh on Iowa’s overall financial status. 

Financial struggles for Iowa farmers in recent years has weighed on Iowa’s overall economy, according to panelists at the Des Moines Business Record’s annual Economic Forecast forum last week in Ankeny.

“There has been a lot of bleeding here in Iowa in the ag economy. I think that has slowed down, but I don’t think it has stopped yet,” said panelist Christopher Pudenz, economics and research manager for Iowa Farm Bureau Federation. Joining Pudenz on the panel were Jon Augustine, chief investment officer for BTC Capital Management; Debi Durham, executive director of the Iowa Economic Development Authority; and Deanna Strable, president and CEO of Principal Financial Group.

Pudenz said that given Iowa’s reliance on agriculture for many of the jobs in the state — estimates suggest about 20% of Iowa workers are employed by a farm or an ag-related industry — any pain felt in that sector will inevitably impact communities across the state.

“When agriculture sneezes, the rest of Iowa catches a cold. And agriculture is definitely sneezing quite a bit right now,” Pudenz said, pointing to layoffs by machinery manufacturers such as John Deere as a prime example of this trickle-down effect.

Augustine concurred, saying that when the ag economy suffers, “obviously there is a ripple effect that goes through the economy in terms of how that impacts other businesses, manufacturers and suppliers within those communities.”

Durham also echoed Pudenz, noting that since January 2024, Iowa has seen 7,000 permanent layoffs with 5,000 coming from the manufacturing sector.

“We know that manufacturing has a direct line of sight to the ag economy,” she said.

Durham said that a bright spot has been Iowa’s nondurable goods manufacturing — including products like processed foods, toiletries and paper products — which has rebounded after bottoming out last year.

Uncertainty lingers

The change from the Biden to Trump administration brings with it several unknowns, panelists agreed. One big concern for Iowa farmers is whether new tariffs will go into effect and if that will spark trade wars with any U.S. trading partners.   

“I think it’s a negotiating tactic,” Durham said. “The ag folks may have something else to say about that. But from my perspective, most of our trade comes from Canada and Mexico, so I think part of this is [Trump] posturing before reopening the [U.S.-Mexico-Canada] trade agreement when it expires in 2026.”

Pudenz added, “Should the administration choose to proceed with tariffs …, it is typical for our major trading partners to respond by targeting agriculture specifically. That’s certainly something that makes agriculture uncomfortable.

“And then the question be­­comes how does that spread to the rest of the economy — to machinery manufacturers to Main Streets to banks, stores, coffee shops and things like that,” he said.

Strable said that if tariffs are put in place, it could slow the Federal Reserve’s cuts to interest rates.

“I do think tariffs, if any of those come to fruition, could have a much more dampening effect on those cuts,” she said. “And ultimately, I think we believe that [interest rates] will stay higher for longer … I don’t think we’ll see a dramatic drop this year.”

Higher interest rates mean that it costs businesses and individuals more to borrow money. This can be especially pronounced in operating loans for farmers to pay their bills between harvests, adding most costs to the farm’s bottom line.   

Despite pressures on farm incomes, Pudenz said there are plenty of opportunities in Iowa to grow an ag business.

“I think there are really big opportunities to keep and attract more food processing here in Iowa,” he said. “Iowa is a business-friendly state and is key to agriculture production in the U.S. Combining efforts from state government and the business community with everything ag does …, I think ag processing is a major opportunity here.”   

Durham noted that there continues to be capital investment coming into Iowa to support manufacturing efforts and almost 50% of businesses surveyed recently said they expect to expand their staff in the next three years.

“I’m always bullish on the Iowa economy,” Durham concluded.