High production costs: Could U.S. farm aid be a culprit?

Even as farm groups push for another round of emergency assistance, there are concerns in and outside the Trump administration that putting still more money into the agricultural economy may actually prolong growers' financial challenges.

At this year's Commodity Classic, the 30th annual meeting for the grain and oilseed sectors, economists cautioned that emergency payments from government can have the unintended impact of propping up costs for inputs as well as encouraging farmers to keep marginal land in production at a time when commodity prices are depressed.

“We have to be smart as we think about what's the best policies going forward on assistance,” said American Soybean Association Chief Economist Scott Gerlt.

The issue is a concern for Secretary of Agriculture Brooke Rollins.

“These are very difficult but very important questions," she said at a Commodity Classic news conference in San Antonio last week, asserting that increases in input costs seem to track increases in government payments to farmers. 

"I think we have to get to the bottom of this very, very quickly," she added, noting that the administration is investigating farm supply industry pricing practices. 

"Now, having said that, we have to ensure, again, we're supporting the farmer, we're not compromising the food supply, we're not crashing anything unnecessarily, but it is a question that I am very, very focused on. And will remain so," she said. 

In January, Deputy Secretary Stephen Vaden accused Nutrien and Mosaic of working to “collude” to limit U.S. fertilizer supply and control prices, He suggested the administration could take future action to inject more competition into markets, if necessary. 

USDA’s chief economist, Justin Benavidez, has raised concerns about the long-term sustainability of ad hoc assistance and stressed the need to build demand for commodities. Ad hoc payments have to “be a bridge to something,” he said at USDA's annual Ag Outlook Forum. “We want to bridge to better demand conditions for producers across the board,” he said.

Lawmakers under pressure to provide more ad hoc assistance

Leaders of the Senate Agriculture Committee have discussed providing $15 billion in additional payments to farmers this year on top of the Trump administration's $12 billion Farmer Bridge Assistance Program and the payments that will be going out to producers this fall as result of changes to commodity programs enacted last year. Minnesota Rep, Angie Craig, the House Agriculture Committee's top Democrat, introduced legislation seeking $17 billion in additional aid. 

Carl Zulauf (Ohio State photo)

Zippy Duvall, president of the American Farm Bureau Federation, said the additional funding is critical to growers. 

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The bridge assistance program "relieves a little pain. It might help someone get through this planting season, but really and truly, there's going to be have to be additional bridge payments made, and Congress is going to have to find a way to make that happen," Duvall said in an interview with Agri-Pulse on the sidelines of Commodity Classic.

Economists have long debated the impact of farm program payments on both production costs and land rents. . 

Ohio State University economist Carl Zulauf told Agri-Pulse "there is consistent evidence that government payments result in higher land prices and rents. The disagreement is over the share of government payments that end up in higher land and rent prices, not whether it happens."

Zulauf co-authored a recent report that concluded that government payments had “more than eliminated crop sector loss” in recent decades. “No business likes losses, but losses are important to incentivize efficiency in a market economy at the individual firm level and at the collective sector level,” the report says.

Zulauf said permanent farm income supports like farm bill commodity programs likely have a bigger impact than temporary programs.

Policy debate comes amid prolonged downturn

During a panel discussion, ASA's Gerlt said soybean farmers in 2026 are forecast to see a fourth straight year of negative returns in the market. “You have to go back to the late '90s to find that sort of continued, sustained loss through time,” he said.

America’s corn growers also are facing a fourth consecutive year of negative returns on average in 2026, according to National Corn Growers Association chief economist Krista Swanson. 

USDA’s forecast for production expenses, both last year and in 2026, shows key input costs down. Meanwhile, as Rollins touts the administration's success in quelling costs, farmers online and at Commodity Classic say their costs haven’t dropped, citing products like nitrogen fertilizer.

Ironically, the financial help government is giving farmers may be at least partially to blame, according to the economists.

“We have to make sure that we're not encouraging producers to keep acres in production that maybe shouldn't be, and keeping those input costs high,” said Gerlt, who singled out the burden of high cash rents for some U.S. farmers versus lower land costs enjoyed by rivals in Brazil.

Former USDA Chief Economist Seth Meyer said bringing input costs down is a big challenge in the short run. He noted that the joint Justice Department-USDA investigation of higher input prices might be enough pressure to “shake things loose.”

Overall, the “injection of doKrista Swanson (NCGA photo)llars into the system” has moderated the impact on attempts to lower costs because the market knows farmers can spend, said Meyer, head of the Food and Agricultural Policy Research Institute at the University of Missouri.

NCGA last month released a survey of farmers and analysis showing that rising production costs, driven by reliance on specialized inputs and equipment supplied by a limited number of companies, has increased the cost of producing corn over the past 50 years, "forcing more farm families to rely on income earned beyond the farm."  

In a sobering backdrop to the discussion on the farm economy, NCGA's look at ag from a historical lens paints a stark picture and warns that generational farm transfer is under threat. 

"In 1776, roughly 90-95% of the nation’s 2.5 million people lived in rural areas and worked in agriculture, forming the backbone of the colonial economy. The work was physically demanding, relying on human and horse-powered labor," the report said. "Today, agriculture and related industries provide about 10% of U.S. employment, with only 1.3% of the labor force working directly on farms."