Why is the ag sector downsizing? It starts at the farm

While getting my hair cut, the salon “shop talk” began in the usual places; what’s new with the family, upcoming vacations, fun restaurants to try.

I was surprised when the conversation shifted to the state of Iowa agriculture.

It seems everyone knows someone who knows someone who has been affected by several layoffs at companies like John Deere, Firestone, Kinze Manufacturing or the closure of Iowa-based packing plants.  It’s hard not to notice when agriculture accounts for one in five Iowan jobs, yet our state has lost 4,000 ag adjacent jobs this year alone.

While one stylist understood it was because the ag economy is in a downturn, she shared she wasn’t exactly sure why that is.

In between the hum of hairdryers, I briefly mentioned farmers being more conservative with their spending amid low crop and livestock prices they’re receiving, and that has a trickle-down effect.

But that’s a high-level overview of a complex situation.

Economists project a 23% drop in 2024 farm income compared to 2022.

Margins across family farms have been slim.

In Iowa:

• Current corn prices indicate a loss of $155 per acre.
• Current soybean prices indicate a loss of $85 per acre.
• Hog farmers have averaged a profit of only 31 cents per market pig this year.
• Cattle farmers have averaged a profit of $38 per finished steer this year, down from $131 just last year.

Why? Let’s start with inflation.  

You’ve probably seen images of side-by-side online grocery cart orders showing the increase price of everyday items. Everyone and their dog have been shocked by inflation, particularly when grocery prices increased by 13.5% in August of 2022.

While it might seem like farmers would reap the benefits of these higher prices, their share of the dollar during that time was 14.9 cents—the lowest in the 30 years since it’s been tracked by the U.S. Department of Agriculture.

Meanwhile, Iowa State University data shows costs related to growing a healthy crop rose 36% between 2019 and 2024. Costs related to machinery rose a staggering 40%. And this year’s crop was the second-most expensive ever planted.

Farm loan interest rates have also increased (and continue to). 

Every year, many farmers take out a line of credit for farm-related purchases. Data from the Chicago Fed shows between July 2021 and July 2024, interest rates on farm operating notes nearly doubled.

To put it in perspective, three years ago if a farmer was loaned $100,000 from the bank, they would have paid $4,400 in interest that year. This year, they’d pay $8,470.

Many lenders say these higher rates are a return to more "normal" levels compared to the low interest rates of the past decade, but it comes at a challenging time for farmers who are feeling pressures from all sides.

Then, there’s the issue of supply and demand. 

We all remember Econ 101.

When there’s an abundance of an item, all else equal, the price tends to be lower. When it’s in short supply, it drives prices higher.

Domestically, we’ve seen this play out with beef prices.

Many cattle farmers reduced their cattle herd when inflation and drought contributed to soaring forage costs. This smaller herd increased beef prices to record levels. Farmers are holding off on rebuilding their herds because the expenses don’t justify the bids for their animals.

Iowa is also a single player in a worldwide marketplace.

While our farmers lead the nation in many ag products, we’re in competition with other parts of the world. Without stronger trade agreements, U.S. farmers are at a disadvantage to receive stronger prices. In 2025, the U.S. is projected to be in a $42.5 billion trade deficit amid a surplus of grains, lower commodity prices and lack of markets to sell into.

Conditions are weighing on farmers

Farmer sentiment, as tracked by Purdue University, has sharply declined in recent months.

However, farmers understand they’re in a cyclical business, with both profitable and difficult years.

This unpredictability makes risk management tools essential to ensure one bad year doesn’t erase a family farm legacy. For example, crop insurance will help northwest Iowa farmers who faced extreme flooding this summer stay afloat.

As Iowans across the state—from the salon to the supermarket and everywhere in between—take notice of the link between agriculture and our state’s economy, it’s a reminder of how important the local family farm truly is.

They are the roots that tie us all together.

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Learn more about author Caitlyn Lamm here.