Important for farmers to proactively manage their operations

MINNEAPOLIS — The current economic environment for farmers is challenging with tighter margins and more volatility.

“But it is navigable for those who manage proactively, adjust on the fly and are able to stay financially disciplined,” said Bill Moore, chief risk officer for Compeer Financial.

Moore provided information to help farmers make decisions and manage risk during the GrainVantage 2025 webcast hosted by Compeer Financial.

“For the U.S. economy, we see a little bit of a mixed picture because it is stronger than many had expected,” he said. “There were some calls for a late season recession in 2025 and that didn’t really materialize, but we are still facing some real pressures both at the consumer level and the structural level that can’t be ignored.”

Households are spending more on expenses and less on discretionary goods, Moore said.

“While grocery spending has stabilized, food inflation has changed some buying patterns and what is being purchased,” he said.

On the positive side, Moore said, industrial construction remains strong, household incomes have grown to avoid recession and energy prices are working in the right direction.

“The U.S. economy is steady, it is not booming, but it is growing,” he said.

Tariffs have been a big discussion in the news and every conversation, Moore said.

“The observed rate of tariffs has not been as strong as people were anticipating,” he said. “As a result, they are not having the full impact that some of the most alarmist people thought it would back in March and April.”

Tariffs are not a new thing for the United States.

“There are ways to utilize tariffs that will benefit the United States, but it has been so long since we tried this, that I don’t think people really know how it will be played out,” Moore said. “But there are some pros and cons to the process.”

The Trump administration is utilizing tariffs to achieve several objectives.

“That includes returning manufacturing to the United States to the extent that is possible, reducing trade deficits to the extent possible, addressing some unfair trade practices or agreements, protecting national security and potentially raising some revenue,” the chief risk officer said.

Tariffs are having some positive impacts, Moore said.

“We’re seeing a number of agreements to build plants in the U.S. in the billions, if not trillions, of dollars,” he said.

“Whether or not that all materializes remains to be seen,” the executive leader said.

“The trade deficit has gotten better, but the agricultural trade deficit has gotten worse,” Moore said.

“We are at a point where consumer spending is a bit below our pre-pandemic trend, but I would argue that is not a tariff issue as much as it is an economic situation,” he said. “Both before and during the pandemic, lower income houses experienced higher wage growth and that has changed quite a bit.”

Moore said of the three tiers of U.S. consumers, the lowest tier is faring the worst.

“They are still spending though — they are just doing it on credit, which is probably a sign of weakness of the economy,” he said. “Credit card debt is at an all-time high, student loans are at record pace and auto loans are at an all-time high.”

U.S. farmers have produced several years of large crops.

“Technology, seed and genetics continue to push yields higher,” Moore said. “Big production creates price pressures, and we’re in that spot now — so, corn and soybean markets remain well supplied, but demand is solid even if it is not booming.”

However, since the cost of production has not decreased, the chief risk officer said, there is a gap between revenue and cost of production.

“For many farms, cost has come down, but not enough to offset the decrease in crop prices and that has turned into margin losses,” Moore said.

“Compeer continues to believe that farmers in our service territory are well positioned to weather the cycle,” he said. “Our fixed asset land values remain strong, the demand for land is solid, working capital is still very strong, interest rates are still favorable in a historical context and short-term rates are likely to come down.”

There are some long-term trends to watch for including the agricultural industry in Brazil.

“The U.S. is losing its position as the feeder of the world, particularly as it relates to soybeans,” the executive leader said. “Brazil has become the main provider to the globe and in periods where Brazil doesn’t have the crop, then buyers turn to the U.S., but it used to be the other way around.”

For 2026, Moore said, farmers should have a good fertilizer plan and check their soil needs.

“Skipping or reducing phosphorus or potassium on high-testing fields could save up to $70 per acre,” he said.

“Think about variable rate technologies, pay attention to nitrogen credits from soybeans and look at the most cost-effective nitrogen source,” he advised. “Think about side-dress and make some friends with pigs and cows because using manure is potentially another good way to save some money.”

Since seed is the second largest input cost for farmers, Moore said, look at the traits.

“Sometimes getting the most yield also requires spending the most and that doesn’t always pencil, so make sure you are doing the math,” he said. “Consider different varieties and traits and use generic chemicals when possible.”

Farmers should have a risk management plan and a marketing plan.

“We have found that those who do, tend to have the best performance,” Moore said.

“Manage expenses closely, maybe think about debt consolidation and take advantage of changes in interest rates,” he said. “Look at enhancing your crop insurance because crop insurance is probably the last place to penny pinch.”