U.S. farm debt nears record $625B as fertilizer costs and bankruptcies hit highest levels in years

U.S. farm debt is on track to surpass a record high of $625 billion in 2026 as fertilizer costs, elevated interest rates, and falling commodity prices compress margins for the fourth consecutive year, with total production costs expected to top $478 billion before accounting for the additional input cost burden imposed by the Strait of Hormuz closure that began in late February.

The figures come from USDA’s farm sector financial indicators report, which projects 2026 net farm income at $153.4 billion — a nominal decline of roughly $1 billion from 2025 and a real inflation-adjusted decline of 2.6%. The projections were set before the Middle East conflict began driving fertilizer prices sharply higher, meaning the actual 2026 picture is likely to be worse than the official forecast.

The debt accumulation is accelerating on multiple fronts. Interest expenses across the farm economy are expected to reach a record $33 billion in 2026, according to the American Farm Bureau Federation. Nearly 40% more new farm operating loans were opened in Q4 2025 than in the same period of 2024, the AFBF said, and the average operating loan was 30% larger with a repayment maturity three months longer — signals that farmers are borrowing more and taking longer to pay it back. For machinery and equipment loans, average maturities hit their highest level since 2021.

The consequences are showing up in bankruptcy data. Chapter 12 filings — the restructuring tool designed specifically for family farm businesses — hit 62 in April alone, a 130% jump from April 2025 and the highest monthly total since February 2020, according to Epiq AACER data cited by the University of Illinois Farm Policy News. The 315 annual filings recorded in 2025 were already a multi-year high; April’s single-month figure suggests 2026 will significantly exceed that.

Nitrogen fertilizers have been the sharpest single input cost pressure. UAN 28 is up 31% year-on-year, while urea, anhydrous ammonia and UAN 32 have each climbed more than 20% from a year earlier, according to StoneX data. With corn requiring roughly 150 pounds of nitrogen per acre at current application rates, the cost increase represents a substantial per-acre margin hit for the U.S. Corn Belt at a time when corn prices are not rising in step.

The concentration of filings in the Midwest and Southeast reflects the crop mix: rice-producing states like Arkansas have seen some of the steepest increases, in part because rice receives less emergency federal support than corn and soybeans. Montana saw a 200% increase in farm bankruptcy filings in 2025; Pennsylvania was up 160%. USDA economists note that Chapter 12 figures undercount total farm financial distress because the tool is only available to operations where more than 50% of gross income comes from farming — a threshold that an increasing number of family farms no longer meet as off-farm employment rises.

The Senate Farm Bill, now expected in draft form in the coming weeks following the House passage of the Farm, Food and National Security Act of 2026 in May, will be watched for whether it contains meaningful farm safety net adjustments to address the current cost-price squeeze. Trump administration bridge payments and disaster assistance have provided partial relief, but agricultural economists note that market-based income — stripped of government payments — would fall further still in 2026.

Source: Farm Policy News