Borrowing hits record highs, bankruptcies rise: is the risk of US farm debt underestimated?

The Zhitong Finance App learned that US Department of Agriculture officials said that the amount of capital borrowed by American farmers to maintain operations has reached a record high, but the increase in non-traditional credit and supplier credit has left a gap in the federal government's current ability to measure and track farm debt.

Farm debt is record high, official figures or undervalued

Financial pressure is spreading in the US agricultural sector. Due to low prices of agricultural products and high investment costs, growers have faced a situation where profit margins have been reduced for many years in a row. Recently, trade disputes between the US and major buyers have disrupted export markets. At the same time, the war between the US, Israel and Iran has also boosted the prices of chemical fertilizers and fuels.

As the number of farm bankruptcy filings increased, some banks tightened credit, prompting growers to turn to other sources of financing. According to the latest estimates from the US Department of Agriculture, after adjusting for inflation, US farm debt has more than doubled since 2000, from about 300 billion US dollars to more than 605 billion US dollars this year, setting a record.

But this figure probably underestimates farmers' actual debt. Farmers are increasingly borrowing money from suppliers, farmers' cooperatives, equipment makers, fintech companies, and other non-traditional lenders, making it harder for the US government to fully measure this debt.

Non-traditional credit surges, making tracking more difficult

Officials said the USDA is launching research projects to better track these debts and understand whether financial stress in agriculture will affect the wider economy.

“New lenders are constantly emerging, and we need to find ways to obtain this data,” said Jeffrey Hopkins, acting assistant director of the US Department of Agriculture's Bureau of Economic Research.

Kansas State University agricultural finance professor Jenny Yft is currently collaborating with the US Department of Agriculture on a research project to study non-traditional agricultural lenders. She estimates that the actual debt may be two to three times the size reported by the USDA in its “personal and other” category. The agency estimates that this category of debt will reach $45 billion in 2025.

Agencies providing supplier credit include Land O'Lakes, a Minnesota dairy company. It is one of the largest agricultural cooperatives in the US and provides credit lines for farmers. Its CEO, Beth Ford, said on Tuesday at the New York Economic Club that the company's finance department promised loans of about $100 million last fall, which had risen to more than $1 billion by the 2027 crop year.

Hopkins said that in order to collect supplier credit data, the US Department of Agriculture is cross-checking farmers' surveys with loan records from the US Department of Agriculture's Farm Service, and is funding research on the size of the non-traditional loan market, as well as other work. The agency hopes to achieve results within two years.

“Spillover effects”: risk may spread to the wider economy

Wesley Davis, partner at Meridian Agribusiness Advisors, said that in the last quarter, about half of US commercial farms relied on suppliers or non-traditional lenders to pay operating expenses, an increase of about 10% over the same period last year.

As a result, Hopkins said the US Department of Agriculture is studying “whether there are potential areas that could have spillover effects on other parts of the economy.” He pointed out that in the past, there have been situations similar to the subprime mortgage crisis from 2007 to 2010. This crisis affected the entire economy, and data were limited at the time, making it difficult to distinguish between healthy debt and problematic debt.

Historically, USDA data measuring farm debt came from data reported to regulators by banks, agricultural credit agencies, and other lenders. To measure supplier credit, it usually uses an agricultural resource management survey, which is an approximately 24-page producer questionnaire. According to USDA data, the response rate has dropped from around 68% in 2009 to nearly 33% in 2025.

The media interviewed more than 52 commercial-scale crop growers in seven Midwestern and Southern states, most of whom have 7 to 10 separate lines of credit, and some even have more than 30. One Iowa family said there were 42, mainly because equipment dealers usually require a separate line of credit each time they buy or lease new machinery.

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

In 2024, a peer-reviewed study by Kansas State University, the US Department of Agriculture's Economic Research Bureau, 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 non-traditional lenders issued four times more equipment debt than USDA data.

“How can lenders, policymakers, regulators, and key stakeholders accurately assess debt levels and farm financial stress when many lenders that serve the most stressed borrowers report neither debt volume nor farm financial stress?” Yft, one of the study's authors, said.

Hopkins said that some supplier financing has been included in the federal data analyzed by the US Department of Agriculture. He also pointed out that what some farmers think are loans funded by suppliers is actually credit issued by agricultural credit systems or commercial banks, and these institutions will report such debts to regulators.

Davis said vendors and retailers that provide credit help customers buy their products. But these companies themselves may also bear additional risks, particularly if the credit they provide is not backed by assets. “The risk we may see is financial distress not only for farmers themselves, but also for the agribusiness ecosystem as a whole,” he said.