Margin Squeeze Continues

This is Tim Hammerich of the Ag Information Network with your Farm of the Future Report.

In 2024, the U.S farm economy faced serious challenges, like a declining net farm income and rising production costs. 2025 is also off to a rough start. David Widmar of Agricultural Economic Insights believes margins will continue to be squeezed, and while he hopes we can find price stability, it’s likely to take cost-cutting to find economic profits.

Widmar… “We're going back to a stable era and the stable era is this idea of, you know, very little if any economic profits in the long run. At zero economic profits, you're getting a return on all those assets and resources utilized. And so you're going to be able to grow your net worth. And if you're able to get your cost of production even lower, you can make some economic profits. I always tell producers at zero economic profits, your accountant's probably going to give you a tax bill, right? Like, this is the way that works out. But the point here is the margin squeeze is what we're, we want to get out of and that's going to take, you know, that cost cutting. And at this point, it's a little unclear how much of the cost cutting is going to come out of the the variable costs, the things that we get price sheets for, and how much of it's going to come out of the things that we do around the farmstead, our family living, our labor, our machinery, our cash rents, and our farmland values.”

Again, that’s co-founder of Agricultural Economic Insights, David Widmar.