Agricultural lenders delivered a somewhat pessimistic forecast for the US farm economy, projecting that barely half of farm borrowers would be profitable this year, and less than half would remain profitable in 2026. Still, even amid rising pressure, the latest Agricultural Lender Survey from American Bankers Association and the Federal Agricultural Mortgage Corporation (ABA and Farmer Mac) says the agriculture sector remains fundamentally strong.
The survey, based on responses from more than 450 agricultural lenders nationwide, found that lenders expect 52% of ag borrowers to remain profitable in 2025, down from 57% in the previous year and more than 80% in 2022. Lenders don’t expect conditions to improve anytime soon either, projecting less than half of borrowers will remain profitable in 2026. Below are some of the highlights from the survey, which is available HERE.
Top Concerns for Producers – Most lenders are primarily concerned about grain and cotton farmers. Nearly 70% say they’re worried about grain profitability, up from just 15% two years ago. The authors note that nearly all crop producers are facing significant downward pressure on profitability as stagnating prices and elevated input costs squeeze margins. This significant jump from only 15% of responses in 2023 highlights the perceived rapid deterioration in grain sector profitability. By contrast, lenders express much less concern about livestock operations, particularly beef and poultry. Nearly a third of responses expressed little to no concern about the beef sector, a sharp improvement from 2021, when only 1% of lenders shared the same sentiment. Meanwhile, concern levels about the dairy and swine sectors dropped from more than 30% last year to 15% or less this year.
Increased Loan Demand – One result of tighter profitability conditions is an expectation for increased loan demand. Nearly 93% of ag lenders surveyed expect farm debt to increase over the next year. The rising demand for farm loans mirrors previous downturns in the farm economy. Ag producers were able to use cash to finance operations as farm incomes surged in 2022 and the surrounding years. However, cash has become increasingly scarce for many operations today, prompting some producers to seek new or additional loans. Previous periods of tighter farm incomes have also been accompanied by greater demand to restructure debt. As lenders evaluate farm cash flows, one solution often utilized is terming out debt — that is, refinancing short-term credits into longer-term loans, thus easing the annual impact on the income statement. Indeed, the number of lenders expecting loans backed by farm real estate to increase over the next year jumped in the 2025 survey results.
Land Values – The authors note that the strength of farmland values in recent years enable many producers to consider loans backed by real estate as an option. The USDA reports sector leverage has dropped over the past five years as asset values have outpaced overall debt. Still, the cost of tapping farmland equity will cost more than in the last downturn, as interest rates today are elevated relative to the late 2010s. Farmland values rose for a fourth straight year in 2025, with a greater proportion of lenders reporting increases as well. This marked the first time this has occurred since 2021. The momentum in farmland values has carried forward even as tailwinds such as low interest rates and strong investor demand have faded. One factor still supporting land values, according to the 2025 survey, is the limited supply of farmland for sale. Respondents reported less land on the market this year compared to last, the third consecutive year of decline. According to lender responses, the trend of farmland values being propped up by limited supply is projected to end in 2025. Over the next 12 months, the majority of responding lenders project farmland sales will increase. Combined with a tighter profitability outlook, lenders expect increased sales to push down farmland values next year for the first time in five years. Interestingly, the 2025 responses echo those from 2024, when lenders also foresaw values slipping as more land came up for sale. If supply rises faster than demand, that scenario could finally materialize. However, lenders’ expectations for a modest increase in farmland for sale do not suggest that supply will overwhelm the market. About two-thirds of lenders indicated that farmland values in their region are unlikely to change over the next year. It’s also worth noting that the proportion of lenders predicting land values to fall by -10% or more over the next 12 months actually declined to 3% in the 2025 survey, from 5% last year.
Cash Rents – Similar to farmland values, cash rental rates began to broadly plateau in 2025. Nearly three-quarters of responding lenders (73%) reported cash rental rates were unchanged relative to the previous year. Among lenders that did report a change, approximately twice the number of responses reported higher cash rents in 2025 than those who reported they were lower. Approximately 90% of lenders indicated they expect rental rates will either stay the same or decline over the next year.
Deteriorating Credit Quality – Concern regarding credit quality increased in 2025 amid the ongoing challenges facing borrowers. Extraordinarily strong loan performance pushed delinquency and charge-off rates to historically low levels beginning in 2021, but cracks have begun to form following a drop in commodity prices over the past year. While the majority of lenders reported delinquency and charge-off rates for outstanding agricultural loans were unchanged in 2025, the share reporting deterioration increased relative to last year. The report authors note that, looking forward, “the highest proportion of lenders over the past decade now expect meaningful deterioration in loan performance through the next year.”
Tightening Loan Standards – A larger share of lenders reported tightening underwriting standards and loan terms for agricultural credit in 2025. Nearly 3 in 10 (29%) of lenders tightened standards for loans secured by farmland, and 49% tightened standards on loans to finance agricultural production — up 10 and 19 percentage points (pp), respectively, from 2024. Survey results show plans to continue tightening loan terms going into the next year as well.
Farm Retirements – One additional outcome of a challenging farm economy is that lenders reported an increase in farm retirements in 2025. Farm retirements, according to lenders, have increased each year that the survey has asked the question. As the farm profitability outlook has shifted, especially for crop producers, lender expectations for farm retirements have jumped. More than 75% of lenders reported they expect an acceleration in farm retirements over the next 12 months, a resounding increase from 2024.
