For decades, we’ve celebrated rising American farmland values as one of agriculture’s greatest success stories. Higher land prices have created enormous wealth for families, strengthened balance sheets and provided collateral that has helped finance everything from equipment purchases to business expansion. But I’ve been thinking about something we don’t discuss nearly enough. Could one of American agriculture’s greatest financial strengths also be creating one of its biggest competitive disadvantages? New research comparing soybean production costs in the United States and Brazil suggests that question deserves considerably more attention.
A November 2 analysis from FarmDoc (which I encourage everyone to read in full HERE) examined nine representative soybean production systems across the two countries using data from 2020 through 2024. Researchers found that average total production costs were $616 per acre in the United States compared with $416 in Brazil. That’s a $200-per-acre difference, which becomes substantial when you’re competing to sell millions of bushels into the same global marketplace. But the most interesting discovery wasn’t the size of the difference. It was where that difference came from.
You might assume Brazilian producers have access to cheaper fertilizer, chemicals or other operating inputs. The research actually found the opposite in several important categories. Brazilian producers averaged $85 per acre in fertilizer expenses compared with $57 in the U.S., while pesticide expenses averaged $81 versus $56. American producers spent more on seed, but overall direct production expenses were slightly lower in the United States, averaging $200 per acre compared with $218 in Brazil. Brazil wasn’t winning the cost comparison because its producers were spending less money growing the crop.
The significant difference was in overhead, particularly land-related costs. U.S. operations averaged $251 per acre in overhead expenses compared with $97 in Brazil. That $154 difference accounted for most of the overall production-cost gap. Keep in mind these are representative farms, not national averages, and overhead includes expenses beyond land alone. But here’s what makes that distinction especially important. Producers can negotiate fertilizer purchases, adjust chemical programs, improve equipment efficiency and invest in technology. They have considerably less flexibility when it comes to the cost of purchasing or renting land. That creates a structural challenge that better management alone may not overcome.
Think about an American producer whose family purchased land several decades ago. The appreciation of that property may represent millions of dollars in accumulated wealth, and if the acreage is owned debt-free, that producer may have relatively modest annual cash expenses associated with the land. Now consider a younger producer attempting to purchase comparable acreage at today’s prices or rent it at prevailing rates. Both are selling into the same commodity market, but their financial circumstances can be dramatically different. The established landowner enjoys an important cash-flow advantage, although even debt-free farmland carries an opportunity cost because the capital invested in that property could potentially be deployed elsewhere.
That brings us to an important distinction between farmland as an investment and farmland as a productive business asset. Rising land values are generally welcome news for property owners, but the income generated from growing crops doesn’t necessarily increase at the same pace as the underlying land price. If farmland appreciates considerably faster than its earning potential, new buyers must commit more capital to generate essentially the same agricultural revenue. Meanwhile, higher market values can influence cash rents and the financial expectations of landowners, even when the actual productivity of the acreage hasn’t changed.
There’s an interesting contradiction here. American agriculture has become extraordinarily productive. Producers have invested in genetics, precision technology, machinery, fertility management and countless improvements that allow them to produce more efficiently. Yet some of those gains may be offset, from a competitive-cost standpoint, by what we’re willing to pay for the land required to produce the crop. We can become better at growing soybeans without necessarily becoming cheaper at producing them. That’s a very different way of evaluating agricultural progress.
Brazil certainly has its own challenges. Producers there generally face substantial fertilizer and crop-protection requirements, exposure to imported inputs, transportation difficulties in some regions and currency volatility. The research showed that Brazil’s overall cost advantage narrowed considerably during the 2023 input-cost surge. And production expenses alone don’t determine export competitiveness; transportation, exchange rates, yields and delivered prices also matter. Nevertheless, the comparison illustrates why buying inputs more efficiently isn’t always enough to overcome differences in the underlying agricultural cost structure.
For American producers, this raises questions extending well beyond soybeans. How much should we be willing to pay for another acre when commodity returns aren’t keeping pace? Are rental rates being driven primarily by what agricultural production can support, or by the wealth and competition surrounding farmland ownership? And when we talk about protecting the value of American farmland, are we considering the economic consequences for the next generation trying to establish or expand an operation?
I’m certainly not suggesting that appreciating farmland is bad or that American land values need to fall. Land ownership has been one of the most effective ways agricultural families have built long-term wealth, and there are many reasons farmland commands substantial prices. But we need to recognize that what’s good for the value of the asset isn’t always equally good for the economics of the business operating that asset. Those interests overlap, but they aren’t identical.
My perspective is that the competition between American and Brazilian soybean producers involves much more than yields, fertilizer prices and technology. It also involves the financial structure underneath each acre. We spend a tremendous amount of time looking for ways to lower production expenses, but perhaps we should be asking whether the increasing value we place on American farmland is making it more difficult for the business of agriculture to generate competitive returns. If farmland keeps getting more expensive while the commodities it produces remain globally priced, how do we ensure the next generation can afford to compete? (Source: Cortarelli, J. B., G. Gardner and J. Colussi. “Seed, Fertilizer, and Pesticide Costs: Comparing U.S. and Brazilian Soybean Farms,” farmdoc daily (16):199, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, November 2, 2026.)
