Halloween is less than two weeks away, and the farm economy is in its own spooky season. The data leaves a story to be uncovered, and aspects of the farm economy are doing things the old rules say they shouldn’t.
Wesley Davis, partner and chief agricultural economist at Meridian Agribusiness Advisors, has spent the fall playing detective. His new report, The Mysterious Farm Economy, works through 10 of those puzzles. He borrows the framing from Richmond Fed President Tom Barkin, who opened an August speech on the national economy with this line: “If you too like a good mystery, then you like the U.S. economy.”
The farm version starts with a headline that looks fine. USDA forecasts 2026 net cash farm income at $176.4 billion, the second highest on record. Underneath it, $47.4 billion is federal payments, and income from the market is down roughly 34% since 2022, according to the report.
Davis says three of the 10 mysteries matter most for operators weighing capital decisions into 2027.
Mystery 1: Why are land values holding when the economics don’t support them?
Davis says the answer depends on which data you read. He looks at three groups of indicators.
Lender surveys, from the Federal Reserve and trade associations, show values flat to slightly higher. Courthouse transaction data tells a different story. In the second quarter, the Acres.com farmland value index was lower than a year earlier in six of seven Heartland states, led by Illinois at 10.3% and Indiana and Minnesota at 6.3% each, the report shows. The underlying economics point soft, too. Davis says it takes about 16 years of operating returns on soybeans and 19 on corn to pay for an acre of cropland, well above the historical average.
“Lenders say kind of flat to slightly increasing, transaction data say down,” Davis says.
So what is holding the market up? Davis says supply and demand, not farm income.
“Less people are selling, we have some farmers that are still buying, and then we have the other non-farmers buying land as well, and it’s helping to support land prices,” he says. The report adds that data center, solar and wind demand is lifting some parcels, while most listings that do trade come from estates and retirements.
Davis is skeptical of the bankers’ read. “I struggle to see land values increasing consistently, unless they’re looking at a very specific type of buyer or a very specific class of land,” he says. “I also don’t think lender-financed sales are a fully representative set.”
Asked whether the mysteries are a data problem, “Yes,” Davis says. “Is it who you’re asking, how you’re asking, what you’re asking. And also what they believe.”
His 2027 test: “When will land values adjust in line with the underlying economics?” And if they do, he asks, “by how much?”
Mystery 2: Why are crop and livestock inputs so persistently high?
For 20 years, Davis says, input prices and crop prices moved largely together, and livestock and livestock inputs did too. That broke in the past two to three years.
“Input prices have stayed elevated as crop prices and livestock prices have started to come down,” he says.
The report puts crop prices paid 37% above January 2019, with USDA forecasting a record $492.8 billion in 2026 production expenses.
Tariffs and geopolitics are part of it, Davis says. But he points to a second driver: the suppliers’ own costs. Meridian looked at profit margins at selected public companies and found margins that rose and fell with the cycle. Fertilizer EBITDA margins averaged 21% over the 12 months to June 2026, against 15% in 2019. Seed margins sit at 25%, against 21%. Crop chemical margins, at 16%, are slightly below the 2019 level of 17%.
His conclusion is that suppliers passed their higher costs on.
“For the prices to come down, it would mean their costs have to decrease for the companies, or they have to take less profit, both which are kind of hard to imagine happening,” Davis says.
For farm managers, he says the planning question changes. Waiting for input prices to fall is not a plan. The report says the cost base is unlikely to return to 2019 levels without a fundamental decline in supplier input prices.
Mystery 3: Is this cycle repeating the 1980s, or only rhyming?
“Every time there’s a downturn, it’s the one that always comes up for everyone,” Davis says. “The ‘80s really stick in a lot of folks’ minds, and we’ve all heard the stories.”
He and his team compared the financial indicators. The sequence matches. Both downturns followed a demand-driven boom that pushed up land values and input costs. In both, market income fell for several years while federal payments covered part of the gap.
The depth looks different, though.
The sector debt-to-asset ratio peaked at 22.2% in 1985 and is forecast at 13.5% for 2026. The prime rate averaged 18.9% in 1981 and was 6.9% in September 2026. Davis says the share of farms under serious financial stress is also much narrower today based on USDA reported levels of farm debt. Meridian survey data estimates 10% to 12% of farmers are in a tight financial position, against 20% to 30% in the 1980s, per the report.
The biggest difference is who absorbs the loss. Crop insurance covered about 7% of planted acres in 1980. By 2018, about 85% of principal crop acres were insured.
“Our farm safety net’s doing its job,” Davis says. “We would have had an even more rough ‘25 and ‘26 if we didn’t have those safety nets.”
The shift changes the risk profile, the report notes. Direct payments account for close to 30% of forecast 2026 net farm income, and $23.9 billion of that is ad hoc aid authorized outside the farm bill, per the report. Income that needs new appropriations each year carries a different risk for lenders than income from the market.
The report’s verdict: this cycle rhymes with the 1980s in sequence and differs in severity and in who absorbs the losses.
What Davis is watching going into 2027
- Land: When values adjust, and by how much.
- Cattle: “When will pasture conditions improve? And that’ll really be the indicator of when the herd can start to be rebuilt,” he says. He doesn’t expect the beef herd to recover to past levels, partly because “beef on dairy is backfilling a lot of that.”
- Specialty crops: Where acres contract to rebalance supply and demand.
- Non-traditional debt: Where stress may surface across the value chain, including retailers and co-ops that don’t traditionally carry that exposure. “I don’t think non-traditional financing is a bad thing,” Davis says. But when rates are high, “it’s hard to make the case that is right for every farmer.”
