(Radio Iowa) – Iowa farmers are starting to talk with lenders about borrowing money to pay for operations, or to buy land and equipment. The Federal Reserve Bank reports weakness in the crop sector weighed further on farm finances, and credit conditions have gradually tightened. Ty Kreitman, an economist with the Federal Reserve of Kansas City, says while we’ve seen a couple seasons of high costs and low crop prices, it’s too early to draw comparisons to the farm crisis of the 1980s.

“We’re in the second year of losses, but we also have to recognize that the two years prior, 2021 and 2022 and to some extent, 2023, were very strong years for crops, across the ag sector, in fact,” Kreitman says. “So, we had substantial increase in farm incomes during those periods. And so, a lot of operations were able to bolster their working capital.” Kreitman says the situation is bleakest in the crop sector, where farmers have been at or below the break-even mark for the past couple of harvests. He says the number of operations they classify as highly leveraged has been creeping up.

“There’s probably about 20% of farm borrowers who have debt-to-asset ratios, so a ratio measuring leverage of above 40%, and I would say that would be considered high leverage,” he says, “and then obviously distributed throughout that, even beyond that, we’re not quite sure how many would have extremely high leverage.” Kreitman says younger farmers and those who rent most of their land have been the hardest hit by the downturn in the ag economy, because they haven’t built equity like more established operations. He says land prices remain near historic highs, meaning many operations have strong equity.

There have been 18 farm bankruptcy filings in Iowa so far this year, the largest number since 2020.