Loan Levels Hit Record Highs, Bankruptcies Rise: Is U.S. Farm Debt Risk Being Underestimated?

According to The Zhihui Finance APP, U.S. Department of Agriculture (USDA) officials have indicated that American farmers are borrowing at record levels just to stay afloat, but the increase in non-traditional credit and trade credit has created a gap in the federal government’s current ability to measure and track farm debt.

Record Farm Debt May Be Underestimated in Official Data

Financial stress is spreading throughout the American agriculture sector. With commodity prices remaining weak and input costs high, growers have seen their profit margins squeezed for several years. Recently, trade disputes between the U.S. and major buyers have disrupted export markets, while the ongoing Israel-Iran war has driven up fertilizer and fuel costs.

As the number of farm bankruptcy filings increases, some banks have tightened credit, forcing growers to seek alternative financing channels. According to the latest USDA estimates, after adjusting for inflation, U.S. farm debt has more than doubled since 2000, rising from about $300 billion to over $605 billion this year, a record high.

However, this figure may underestimate the actual debt burden of farmers. More and more, they are borrowing from suppliers, farmer cooperatives, equipment manufacturers, fintech companies, and other non-traditional lenders, which are harder for the U.S. government to comprehensively track.

Non-Traditional Lending Surges, Tracking Becomes More Challenging

Officials report that the USDA is launching research projects to better track these debts and to assess whether financial stress in the agriculture sector could impact the broader economy.

"New lenders keep emerging, and we need to find ways to access this data," said Geoffrey Hopkins, acting assistant administrator at the USDA Economic Research Service.

Dr. Jenny Ifft, an agricultural finance professor at Kansas State University, is currently partnering with the USDA on a research project focused on non-traditional agricultural lenders. She estimates that the actual scale of debt could be two to three times what the USDA reports under its “individual and other” category, which the agency estimates will reach $45 billion by 2025.

Institutions providing supplier credit include Land O’Lakes, a Minnesota-based dairy company. As one of the largest agricultural cooperatives in the U.S., it offers lines of credit to farmers. CEO Beth Ford said at the Economic Club of New York on Tuesday that the company’s finance division had about $100 million in committed loans last fall, a figure expected to rise over $1 billion for the 2027 crop year.

Hopkins noted that, to gather vendor credit data, the USDA is cross-referencing farmer surveys with loan records from the USDA Farm Service Agency and funding research to measure the size of the non-traditional lending market, among other initiatives. The agency hopes to achieve results within two years.

“Spillover Effects”: Risks May Impact the Broader Economy

Wesley Davis, a partner at Meridian Agribusiness Advisors, noted that in the past quarter, about half of U.S. commercial farms relied on suppliers or non-traditional lenders for operating expenses, an increase of about 10% year-over-year.

Hopkins said the USDA is studying “whether there are potential areas that could have spillover effects on other parts of the economy.” He recalled that there have been situations like the subprime mortgage crisis of 2007-2010, which affected the entire economy at a time when data was limited, making it difficult to distinguish healthy from problematic debt.

Historically, USDA measures of farm debt have relied on data reported by banks, agricultural credit institutions, and other lenders to regulators. To measure supplier credit, it commonly uses the Agricultural Resource Management Survey, a roughly 24-page producer questionnaire. According to USDA data, response rates have dropped from about 68% in 2009 to nearly 33% by 2025.

The media interviewed more than 52 large-scale crop farmers in seven Midwestern and Southern states, where most reported having 7 to 10 separate lines of credit, some with more than 30. One family in Iowa reported 42 lines of credit, mainly because equipment dealers typically require a new line of credit for each new machinery purchase or lease.

Previous research has found evidence indicating that the USDA may significantly underestimate equipment debt.

A peer-reviewed 2024 study by Kansas State University, the USDA Economic Research Service, and the National Credit Union Administration analyzed more than 4.4 million equipment liens in 14 agricultural states from 2001 to 2019. The study found that the level of equipment debt issued by non-traditional lenders was four times higher than USDA’s figures.

"When many lenders serving the most financially stressed borrowers report neither debt amounts nor farm financial stress, how can lenders, policymakers, regulators, and key stakeholders accurately assess debt volumes and farm financial pressure?" asked Dr. Ifft, one of the study’s authors.

Hopkins stated that some supplier financing is already included in federal data analyzed by the USDA. He also noted that some farmers consider loans from suppliers as supplier financing, when, in fact, they are made by the Farm Credit System or commercial banks, which do report such debts to regulators.

Davis observed that suppliers and retailers who extend credit help customers buy their products but may themselves incur additional risk, especially when the credit they offer is unsecured. He said: “The risks we may see are not just for farmers themselves but could spell financial distress for the entire agribusiness ecosystem.”