Here we go again...
In 2025, the agriculture sector is facing unprecedented challenges. Since 2022
farm related income from grain sales has plummeted, while input costs (chemical,
seed, and application costs) have increased exponentially. The result is
revenues well below breakeven points which are negatively affecting large
segments of rural America.
Furthermore, the federal deficit is now approaching $40 trillion (US Debt Clock), and inflation and higher interest rates are tightening credit available to farmers. The governments answer to this complex problem was the American Relief Act passed in December 2024. Unfortunately, direct payments from this program failed to even cover half of the row crop losses incurred last growing season.
Cattle, on the other hand, have been a mixed bag. Cow/Calf operators are seeing historical profits, driven by tight supplies, strong demand, and a little thing called a screwworm, that has suspended cattle trade with Mexico. As such, prices have remained strong. However, this has not equated into success across the entire sector. Backgrounding and feedlot operations are struggling to maintain profitability. As both sectors find it difficult to purchase affordable stockers, with elevated prices, and keep their cost of gain low enough to show positive margins. Profitability has softened and profitability is a concern.
The fall harvest in North Central Kansas is still in question. The NWS is calling for 98-102 degree temperatures over the next 8-14 days. I have seen some projections pushing the heat wave out for 30 days. What is worse, precipitation is projected to be below normal. Corn, Soybeans, and Sorghum in the area are going be subjected to difficult conditions, especially corn that is near tasseling. Corn can tolerate short bursts of elevated temperatures if soil moisture is adequate. Unfortunately, soil moisture conditions in northern Kansas are just adequate, which means dependent on timely rains.
Finally, the basis on sorghum is ridiculous! This weak basis is due to uncertainty in export demand, particularly from China. Elevators across the state are discounting sorghum well below futures. As such, drought and markets basis trends are beyond challenging.