Agricultural bankers are growing increasingly concerned about the financial stress facing row crop producers heading into 2026.
Lenders should be on the lookout for signs of possible credit pressure among borrowers, according to Zach Allen, senior director of food and agribusiness at First Financial Bank in Cincinnati. Those red flags could include buying cheaper inputs than they usually would and skipping on soil fertility issues.
“In the conversations I’ve had with my grain and oilseed producers over the last five to six months, I’ve picked up on way more defeatist language,” Allen said. “You know, borderline throwing in the towel.”
Allen led a breakout session headlined "Early Stress Signals in Ag" at the American Bankers Association’s annual agriculture conference. The session drew three times as many conference goers as similar presentations have in recent years, Allen said.
Farmers of corn, soybeans and other key crops are expected to see a third straight year of income declines in 2025. Lower commodity values, surging input prices, excess supply and higher interest rates are all taking a toll.
Fewer than half of U.S. ag producers are seen turning a profit next year, the lowest level in five years, according to a survey of ag lenders released last week by ABA and Farmer Mac.
Ryan Lee (LinkedIn photo) "Credit quality concerns have intensified," said Ryan Lee, ABA’s research and economic policy manager. Almost 70% of lenders are worried about growers of grains and cotton, up from 15% two years ago. The outlook for livestock is brighter amid robust demand.
Yet even with gains on the beef side, just 52% of overall ag borrowers are expected to be profitable this year, and almost all bankers predict farm debt will climb higher over the next year, underscoring tighter working capital and increased reliance on credit.
Yet the farming sector is still "fundamentally strong." Bankers have approved about 84% of loan applications over the past year and expect to renew nearly 88% of existing loans in 2026, the survey found.
Still, ag economist David Kohl of Virginia Tech told the bankers to expect about 40% of their row crop clients to request refinancing. If they don't, "they should be," he said.
"Working capital preservation is going to be very critical," said Kohl, who believes debt-to-asset ratios are overused as a risk measure. "We're having a liquidity profit issue."
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Senate Agriculture Chairman John Boozman, R-Ark., underscored the economic concerns in a video message to the conference. "You are meeting at a crucial moment as rural communities experience an increase in challenges despite record yields. Market volatility and high costs are threatening the future of family farms.”
The concern about row crop producers contrasts the boom times on the livestock side, especially for beef. Pinched supply is colliding with higher demand as more Americans try to fight obesity with trendy GLP-1 drugs, cutting sugar and carbohydrates and boosting intake of protein. The downturn in grain and oilseed prices also helps by lowering the cost to feed cows, hogs and chickens.
The protein craze isn't expected to fade anytime soon.
The outlook for growing crops like corn, soybeans and wheat is much murkier, with uncertainty swirling over whether the Trump administrations still plans to provide billions of dollars in emergency funds to struggling farmers. Exports to China, the world's biggest ag importer, are in doubt despite the Trump administration touting a trade deal with Beijing announced Nov. 1.
Farmers, the market and lawmakers are waiting for the Chinese government to confirm terms of the agreement. USDA's crop and trade reports last Friday did little to boost confidence that major purchases are coming.
"Even if China makes the reported agreed-upon purchases of soybeans, it would be less than half of what they did last year," Sen. Amy Klobuchar, top Democrat on the Senate Agriculture Committee, told the bankers via video. “That won’t make up for the damage already done, or for the higher costs farmers are still facing.
Waiting for data
As far as available financial information, farmer bankruptcies doubled in this year's first quarter versus the same period a year ago, but they also are at an all-time low on a three-year basis, said Ed Elfman, senior vice president of Agricultural & Rural Banking for ABA. While the industry's bankruptcy numbers remain below other difficult eras, and well below the crisis-filled 1980s, there's a three- to six-month lag in key indicators.
Ed Elfman (ABA photo)On measures like loan renewals, which typically happen from December until around March, "right now we don't have the data to tell us that it's looking bad," Elfman said.
“What's interesting, though, is when you look at the Federal Reserve surveys and some of the other things that have come out, the sentiment is that loan renewals will go down and loan demand will go up, which tells us that the ag economy is struggling a bit," he said.
Meanwhile, longer term concerns are growing as to future sources of demand for top American crops as ag producing regions like Brazil sell more of their harvests to China, and as more transportation electrifies.
"The grain folks need places to go with their product," Elfman said. "In some ways, we've exhausted the countries to go to.
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