'25 2nd Quarter Ag Outlook
- Grant Wiese
- Apr 7
- 5 min read
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'25 2nd Quarter Ag Outlook
Which direction?
It is time for our quarterly ag outlook. A lot is happening, so this information may not apply by next week. Enjoy!
Interest Rates
FedWatch (Source: CME FedWatch Tool – CME Group) is expecting a 37% chance that we see 3 .25% rate decreases during the 2025 calendar year. It is worth noting they have been overly optimistic of the number of rate decreases for the better part of the past 2 years. What is working in their favor is the concern over global economies. If we continue to see the S&P down along with large countries struggling to gain traction in their economy, it could force interest rates down sooner.
Last year we had an inverted yield curve. These are typically followed by a recession which we appear to be in the middle of now.
An inverted yield curve is when you compare the 2 year and 10-year treasury bonds. This occurs when short term bond rates are higher than long term bond rates. This is inverse from logic in that you get paid more for investing in the short term compared to the long term.
10 year treasury bonds haven’t been this low since… September 2024 (Source: Resource Center | U.S. Department of the Treasury). Rate have moved slightly lower over the past 2 months but are still around .30% higher than the low of 2024.
The farm (and commercial) economy REALLY needs rates to move down immediately and stay there for the next 9 months. The reason this is so important is because all the 2020 5-year low interest rates loans are repricing this year. Producers have tight cash flows today. They REALLY won’t like their cash flow once their land note reprices from a 3% interest rate to 7% interest, doubling the amount due next year. Without long-term rates lowering, we will see more land and commercial properties coming up for sale in the short term.
Land Prices
I have yet to see a higher price in 2025 for my area than what was sold in 2024. And 2024 prices didn’t exceed 2023 prices. With that said, quality ground will occasionally match high prices from over the past few years.
Prices on average are modestly lower (5-10%). There have been occasional sales that have surprised everyone and sold at >15% below previous highs. From my exposure, these have been larger tracts of ground which many individuals cannot afford, eliminating many potential buyers or interested parties. If you have the appetite for this type of growth, the opportunity could be there.
There is a lot of real estate moving. If you want to grow, be prepared. Some of the dirt has had to move quickly or is exchanging hands quietly. The number of bankruptcy sales is on the rise. These create great opportunities to buy on a discount. Make sure you work with an experienced attorney before considering one of these deals.
Yields
Need to get the crop planted!
Equipment Prices
There were some large 4wd tractor deals this past year on lease terms through dealerships. Those may have taken place in a small window to meet seasonal sales goals. I haven’t seen anything recently to imply that auction prices have fallen out of bed. Prices have remained reasonable for the buyers and the sellers. My bigger concern is the number of late season auctions that have come up, either through liquidation or late retirement sales. Poor timing with these auctions, or too many of them, could move prices lower.
Operation Improvements
Grain bin orders have been high over the winter months. Irrigation improvements (converting motors to electric) have also occurred. Tile is a luxury that current balance sheets haven’t supported as much. Equipment upgrades have been strategic. Instead of upgrading 3 pieces, only 1 planned upgrade has been made. Money has been cautiously spent on improvements this year.
Commodity Price Direction and Marketing
Lower. Tariffs are destroying soybean prices and corn planting intentions are pulling corn down. We had some decent prices to market into over the winter months, although many breakevens were in the red at those prices.
Global stocks and a weaker dollar leave room for optimism. Plus, a spring rally could be in order.
Weather
I get my weather updates from Eric Snodgrass with Nutrien Ag Solutions, you should sign up for his e-mail, eric.snodgrass@nutrien.com, and check out his videos here: Apr 4, 2025: Historic Flooding MidSouth | 3-Days of Severe Storm Risk | Cold Pushes East Frost Risk
Much of the western corn belt is in a drought while the central belt is currently flooding. If the trend continues (which would match the long-term weather projections) I would expect there are early crop issues due to the lack of ideal planting conditions.
Working Capital Trend
Strong yields in my area combined with an uncharacteristic harvest price rally allowed for many operations to maintain their working capital position for the year; or at least minimized losses. This is a huge relief after devastating Working Capital losses last year.
Working Capital gains were hard to come by for row crop farmers. Operations that are diversified had a better chance of finding meaningful profits. Row crop/cattle producers faired the best and were able to put together a nice 2024 year with some reasonable gains!
Overall Financial Picture
(4th Quarter comments: With strong yields and decreasing interest rates, there is reason for optimism when we update year end financials for 2024. Balance sheets will hopefully ‘hold it together’, allowing for calculated growth in 2025 for many operations. I expect breakeven projections for 2025 to continue to be tight. Continue sharpening your pencils and find ways to improve net profit within the operation.)
Balance sheets did, for the most part, ‘hold it together’ during the 2025 Renewal season. Proactive farmers recognized the tough 2024 they went through and adjusted their plan to avoid large Working Capital losses in 2025. They should find a way to make it work for 2025 and get to 2026 in a similar position.
Reactive farmers continued to spiral lower. Farm bankruptcies are on the rise, and the number of questionable finance strategies from banks are occurring as well. Unfortunately, too often I see operational restructures from farmers and their lenders at the wrong time. Farmers get an influx of cash without any coaching, and believe they are good-to-go for the next 10 years. 1 year later their bank drops their Line of Credit and no other local banks will take them on due to their compromised position.
This leaves you scrambling looking for an out-of-state, high-interest rate lender to get your 2026 crop planted. I share this to serve as a warning, I have seen it occur way more frequently that I would like to.
Final Summary
Every operation is different and needs alternative advice compared to their neighbor. Nothing mentioned above is a one size fits all approach. While I hope this is helpful, what is better for your operation’s well-being is to update your own financials, run them by a trusted financial advisor, make your own plan for the upcoming year, and adjust that plan when necessary.
If you want that financial advisor to be me, you can get a time booked.
I have limited spots available for 1-hour consultations helping you:
Understand your farm's financial position.
Prepare for future growth opportunities.
Discuss purchase & finance options on farm transactions you are working through now.
Sign-up here if my services can benefit your operation:
Have a great week!
Grant
