Editor’s note: This is Part 1 of a two-part series.

While crop production margins have been negative and subsequently the number of farm bankruptcies has climbed, there is nowhere near the degree of financial crisis occurring that defined what the ag sector went through in the 1980s. Nationally, farm bankruptcies were 44% higher last year than in 2024, but the increase is inflated in terms of percentage from a relative low level. The farm media talks up the current financial squeeze, intending to elicit sympathy from readers and the public, but what it shows is the lack of appreciation for what a real farm sector economic disaster looks like. In many ways, the ag depression of the 1980s was the defining period of my life.

Interest rates have climbed from historical lows but are a third of what they were at their peak in the 1980s crisis. Commodity prices reflect the value of the dollar. Currently, the dollar index hits a wall near par (100). Comparatively, during the U.S. farm crisis of the 1980s, the U.S. Dollar Index (DXY) surged dramatically, peaking at 164.72 in February 1985. This represented an appreciation of roughly 80% to 95% from its mid-1980 trough, devastating American agriculture by pricing U.S. commodities out of global markets. With the U.S. dollar that high, no foreign exchange could afford U.S. farm goods. $3 corn U.S. price became nearly $5 corn to export market buyers because of the currency exchange. My bet today is that with rising inflation the U.S. dollar is likely to weaken, and that would help support commodity values.

President Donald Trump has harmed our export trade with illegal tariffs and failed to compensate for that in new trade agreements, but despite that, many exports such as corn are actually pretty solid because of the comparatively weak dollar. The trade war with tariffs created a problem for which Trump offered compensation with bridge payments, expecting adoration. In my opinion, these payments are more like being adrift on a raft on a sea of red ink than crossing to a place of safety. Given the circumstances, they are needed.

In the 1980s, we could not make money off the price of corn so we fed it to hogs and cattle, got jobs off the farm, wives went to work and we built an ethanol industry to add value. I am speaking from personal experience. We lived this.

In 1983, I got my commodity broker license, and my wife became the center director of Iowa Lakes Community College. Her job provided us with health insurance. A couple of years later, this company was formed. The ag depression of the 1980s was a fire that either burned you up or you turned to steel. Admittedly, things are not the same today. Farmers can no longer produce hogs without the permission of an integrator, communities protest wind turbines and block CO2 pipelines that would add value to corn, making low-carbon ethanol from it. Instead of working to add value to commodities, too many are happy getting ACHs from USDA. Ironically, ask them about the federal deficit and they are alarmed.

The reason that the U.S. dollar soared like it did in the 1980s was because of foreign capital rushing to invest in high-return U.S. treasuries, with money being converted from foreign currency into U.S. dollars. During the 1980s agricultural depression, the U.S. prime lending rate reached an all-time high of 21.5% in late 1981 and averaged near 19%. The federal funds rate also climbed as high as 20%. DTN says the current prime rate is 6.75%, the 10-year Treasury rate is 4.44% and the CCC rate is 4.75%, none of which remotely come close to 1980s ag depression interest rates.

Farmland prices peaked in 1980 and lost 80% of their value before bottoming in the throes of the subsequent liquidation. They peaked at $4,000 acre and bottomed at $800 acre here locally. This was the result of crisis deleveraging as farm assets were divested with stress sales of property. Farms, bought at inflated prices into the 1980 peak, came back on the market as borrowers went upside down on debt versus equity and were forced to sell recently acquired farm properties. Yes, we have again seen an extended period of farmland price appreciation, but leverage used was extremely low by comparison. Many lenders significantly limited lending limits for farmland purchases because their 1980s experience had not yet faded from their minds. Reportedly, as little as 14% of Iowa farmland has a mortgage. Farms were being bought with equity rather than debt. A significant portion of existing farm mortgages are set at historically low fixed rates below the current rate of inflation. This is an entirely different fact-set from the 1980s and why in many regions the margin pressure has not resulted in worse effect on asset values.

The 2022 ISU Farmland Survey below shows a significant reduction in indebtedness on farmland over the last 4-plus decades that is a continuing trend. Realtors say that one primary reason that farmland values did not weaken more than they have is the reduced numbers of farms for sale. Seventy perecent of farms sold are being bought by farmers. Legacy farms continue to absorb neighboring land using the equity of existing holdings. The opportunity of being a farmer is limited to a captive audience of existing farmers and generational change. Investors own farmland as a place to park cash long term. It works.

Much farmland has been owned for generations and carries very little if any debt today. Given the long-term appreciation of farmland, rising values have built equity. That equity will transfer between generations. That is why the substantial estate tax exemption and stepped-up basis was so important to be included in the Big Beautiful Bill Act. This allows the equity to remain in the farms. If I do not outlive our farm mortgage, the debt is covered by a paid-up second-to-die life insurance policy. As a general statement, the U.S. farm sector is financially solid. The problem is the wealth is not evenly distributed with tight margins having depleted working capital of farms with low productivity. Average yields do not cover production costs or cost of living. … To be continued.