LONDON, Ohio — Although the U.S. Department of Agriculture has projected the second-highest farm income on record for 2025, Ohio State University experts warned farmers that the overall economic picture is more complicated during Farm Science Review last week at Molly Caren Agricultural Center in London, Ohio. Uncertainty tied to trade policies, increasing input costs, rising farm debt amid higher interest rates, weaker commodity prices, unusually high government payments and worsening drought pressure all factor into Ohio’s agricultural outlook.
According to the USDA Economic Research Service forecast published on Sept. 3, net farm income is projected to reach $179.8 billion for 2025, a 40.7% increase over 2024.
“Just looking at these numbers, (we’re) seeing that farm income has recovered from the decline that we saw in the last two years, and we are now almost to where we were in 2022, which was a really good year in terms of farm income, but the situation is very different,” said Ani Katchova, professor and Farm Income Enhancement Chair in the Department of Agricultural, Environmental and Development Economics at Ohio State University.
In 2022, the agricultural sector’s backbone had strong fundamentals — strong commodity and crop prices, modest expenses and good profit margins. Now, net farm income is expected to reach nearly $180 billion this year; however, the “picture becomes not so rosy” when the source of that income is taken into consideration, according to Katchova.
“Where farm income is coming from is not from the markets where we want to see farm income coming from, but actually, it’s coming from government assistance this year,” she said.
The largest driver of the income increase is a significant rise in government payments, forecast at $40.5 billion, largely due to supplemental disaster assistance for losses in 2023 and 2024, authorized by the American Relief Act of 2025. The only other year the agricultural sector saw government payments that high was in 2020, when they reached an all-time high of roughly $55.3 billion, with an estimated $35.1 billion of that directly tied to the COVID-19 pandemic. Direct government farm payments for 2024 are forecast at $10.4 billion.
The market
The agricultural markets are a mixed bag this year. While livestock markets are expected to improve, crop markets are forecast to decline. Livestock/animal product cash receipts are set to rise by approximately $30 billion, or around 11.2%, year-over-year, primarily due to higher prices for cattle, eggs and hogs. Crop cash receipts are expected to decrease by $6.1 billion, or about 2.5%, when compared to 2024, driven by lower prices for major row crops like corn, soybeans and wheat.
This paints a bleak picture for this year’s corn crop, as a record yield and increased acres planted are forecast. The USDA raised this year’s corn yield estimate to 188.8 bushels per acre last month, topping 2024’s record yield of 179.3 bushels per acre. In addition, USDA increased its estimate for corn acres planted to 97.3 million — the most since 1937. Katchova expects revenues will remain weak as low prices outweigh production gains.
“The harvested acres cannot offset the low corn prices,” she said.
Incidentally, the lower prices are also in part driven by the higher production and yields, contributing to an expected surplus of corn. Weak export demand due to tariffs and competition from other countries, moderate domestic demand and carryover stocks from last year are also driving down corn prices.
The soybean and wheat crops are also seeing lower prices, as the global soybean supply remains high, and wheat sales volumes are expected to decrease.
A balancing act
It’s not all bad news for farmers. Although they’re contending with a lot, the overall picture for balance sheets remains strong, with farm equity increasing by 4.7% from last year and debt rising by 5%. The rise in debt is expected in a tough year as farmers take out more short-term operating loans to get through the growing season, according to Katchova.
There’s also still good funding available to farmers who need it; however, Katchova warns there’s not a lot of optimism among lenders and repayment rates are weakening.
While the balance sheet remains strong, profitability, particularly return on equity, or the ability to turn a profit on the investment in the farm, has been a struggle for small farms and beginning farmers.
“(For) farms that have a lot of debt or farms that rely a lot on cash-rented acres, it’s very hard for them to have sufficient working capital,” Katchova said.
Coincidentally, cash rents have come down from $185 per acre to $184 per acre, which almost never happens, according to Katchova. However, cropland values remain strong at $9,750 per acre, a 5% increase from last year.
What’s next?
Looking ahead, trade policy, labor costs and weather conditions will continue to shape Ohio’s agricultural outlook.
Trade. The large crop supplies that have been projected are dominating markets right now, according to Seungki Lee, assistant professor and agricultural economist in the Department of Agricultural, Environmental and Development Economics at Ohio State University. Without the domestic demand to consume everything being produced in the U.S., export markets are vital. However, they’ve been complicated by tariffs.
“We are actually having quite a bit of complications with tariffs,” Lee said.
Earlier this year, President Donald Trump imposed sweeping global tariffs under the International Emergency Economic Powers Act. The U.S. Court of International Trade ruled that the IEEPA tariffs were an overreach of presidential authority on May 28, and that decision was upheld by the U.S. Court of Appeals for the Federal Circuit on Aug. 29, allowing the tariffs to remain in effect during the appeal process. The Supreme Court agreed to hear the case on Sept. 9, with oral arguments set to begin in early November.
The back-and-forth has introduced a lot of uncertainty to global trade, which has made it difficult for farmers to build effective risk management strategies, Lee said. While the tariff rate is impacting the market in the short term, the greater concern is the time cost for producers who need to make decisions. Regardless of how things play out in November, a ruling should help reduce uncertainty and identify viable export markets.
“I think a ruling by the Supreme Court one way or the other actually reduces uncertainty in the sense that you either know the tariffs are in place or they’re going to be removed. And we do know trade policy uncertainty is the highest it’s ever been,” said Ian Sheldon, professor and Andersons Chair of Agricultural Marketing, Trade and Policy at Ohio State University.
Labor costs. Reliance on H-2A workers continues to increase in response to labor shortages within the agricultural sector in the U.S., according to Margaret Jodlowski, assistant professor and agricultural economist in the Department of Agricultural, Environmental and Development Economics at Ohio State University. This reliance has been driving up the cost of labor because H-2A workers have to be paid the Adverse Effect Wage Rate, which is set higher than the local prevailing wage to prevent undercutting domestic farmworkers. Additionally, the AEWR has grown rapidly in recent years.
“The AEWR has grown at a really alarming rate over the last, definitely, over the last 10 years,” Jodlowski said.
Fortunately, relief may be on the way. The Department of Labor’s Employment and Training Administration and Wage and Hour Division issued a notice of proposed rulemaking, “Recission of Final Rule: Improving Protections for Workers in Temporary Agricultural Employment in the United States,” on July 2, that could change the way the AEWR is calculated to slow wage growth. This proposed change could lower mandatory wages for H-2A workers and ease labor costs for farmers.
Jodlowski reminds farmers that it’s a complicated process and involves at least three different government agencies, but remains hopeful.
“I am hopeful. This is something that agricultural employers, organizations, commodity groups have pushed for, for a long time,” she said.
Weather. Ohio has also experienced a year of surprising weather, as counties that had about 32 inches of rain in April, May and June — and 28 days of at least a trace of rain in May — are now facing moderate drought conditions and deteriorating, according to Aaron Wilson, state climatologist of Ohio and assistant professor of agricultural weather and climate field specialist with the Department of Extension in OSU’s College of Food, Agriculture and Environmental Sciences.
“Who would have thought at the end of May, first of June, we’d be talking drought again?” Wilson said.
Moisture that traveled up from the Gulf of Mexico created record amounts of humidity, and Ohio experienced the warmest June and July over the last 131 years, with lows in the upper 70s Wilson said.
“We were at 70 degrees or above for dew point. And that’s oppressive, all right. The humidity was oppressive,” he said.
Then, in a total reversal, Ohio shifted from the eighth wettest April through July on record to the driest August on record as the weather pattern shifted and drier Canadian air blew in from the north.
Last week, weather patterns shifted again, creating an omega block, which is high pressure centered over an area with low pressure to the east and west. That high pressure leads to sinking, drying air and warming air at the soil surface, which has been particularly bad for soybeans.
“We’ve lost all of that moisture at the surface that we had just a couple of months ago,” Wilson said. “We’ve really seen that now in our soil moisture tanking, our stream flows are tanking, and it’s all because of this shift, this ultimate shift that we’ve seen in the weather pattern of Ohio.”
Wilson anticipates the rest of September and the beginning of October to be fairly dry, but believes wetter conditions in November and December could provide a soil moisture recharge.
“We’ve got La Niña conditions, cool tropical Pacific Ocean. They tend to be a very active winter for us, so that soil moisture recharge. I’m going to hope, again, that we’re going to see some of that deeper soil moisture recharge ahead of next season,” he said.
Wilson also believes long-term Ohio will see more droughts in years where it also records near-record amounts of rainfall. This year’s pattern of rapid oscillation between extremely wet and extremely dry follows a broader trend of changing weather patterns.
“I know it can be a contentious word, climate change, but when we talk about these weather patterns changing, this is the key factor, I think, impacting Ohio,” he said.
As the agricultural economy continues to evolve, the OSU Extension Farm Office Team is available to help producers navigate legal and financial challenges and improve farm management. For more information, visit https://farmoffice.osu.edu.
