High Production Cost Series, Part 2

The National Corn Growers Association (NCGA) is concerned about the tough financial reality facing many farmers today. While NCGA maintains a persistent focus on driving additional sources of demand for U.S. corn in effort to improve the outlook, it is also analyzing input costs that remain near record highs. This is Part 2 of a three-part series highlighting the financial challenges facing corn farmers and a deeper look at the cost of growing corn.

Investigating the Influence of Inflation on Production Costs

Rising inflation significantly affects the costs farmers face for inputs, machinery, and services. When costs rise for the businesses selling these products and services that farmers need, they can raise their prices to stay profitable or at least economically viable. That translates to higher costs for farmers.

These businesses may face short-term influences of supply and demand fundamentals and other supply chain factors related to their specific product or service. Over longer periods of time, farm input prices are significantly correlated with general inflation.

This USDA cost of production dataset goes back to 1975. When historical costs are indexed to 2025 dollars, there are two historical periods in which costs have been relatively higher than the current 2022 to 2025 period: 1975 to 1985 and 2012 to 2016. Inflation adjusted cost of production for corn was only slightly lower from 2017 to 2021, before the current period extending from 2022 through at least 2026. In other words, inflation adjusted cost of production for corn has been consistently high since 2012. In that time, market year average corn prices were relatively very low in all but three years (2012, 2021, and 2022).

For the 1975 to 1985 period, the average annual production cost in 2025 dollars was $1,082 per acre. The median market-year average price of those years was $2.52 per bushel of corn. If those prices were in 2025 dollars the median would be $10.51. While these costs are likely comparative to what some corn growers with higher-than-average production costs are seeing today, it does not seem feasible that the inflation-adjusted price would be offered today anywhere in the country reflecting the weak correlation of corn price and inflation.

One of the challenges of farming is that production costs are significantly correlated with general inflation over long periods of time, but the market price for corn is not.

Farmers sell a commodity at a price set by the market, regardless of what costs are. Market supply and demand factors significantly influence corn prices, more than inflation rates. The link between inflation and the price of corn is tenuous.

Comparison to Challenging Farm Financial Periods of the Past

In the 1975 to 1985 period, the net profit (gross corn sales less corn costs) for corn was negative in nine of the eleven years. The early to mid-1980s was a period of significant farm financial crisis leading to a rise in bankruptcies. Congress introduced Chapter 12 of the Bankruptcy Code in 1986 specifically for family farmers and fishermen. This was followed by a major influx of over 6,000 Chapter 12 bankruptcy filings by the end of 1987, significantly more than any other time since. In the past twenty-five years, annual Chapter 12 bankruptcy filings have remained below 800.

Chapter 12 bankruptcy filings as a percentage of total farms rose from 2014 to 2019 and remained high in 2020, before dropping significantly in 2021. The high farm bankruptcy trend coincides with the period of sustained high production costs and low prices for corn. The declining trend in 2021 coincides with higher corn prices. Other commodities also experienced similar cost and price trends over this period; and notably, farmers and businesses across the farm sector received high levels of COVID relief and other ad hoc payments that supported farm income in the low bankruptcy years.

Lower government payments in recent years paired with declining prices and sustained high costs, even when adjusted for inflation, coincide with the rising trend in Chapter 12 bankruptcies from the low point in 2023. In 2024, there were 216 Chapter 12 Bankruptcy filings. This was up from 139 in 2023 and broke what had been a downward trend since 2019. In the first half of 2025 there were 181 Chapter 12 Bankruptcy filings, well ahead of 115 at the same point in 2024, signaling growing farm financial pressures.

Summary

Rising inflation significantly affects the costs farmers face for inputs, machinery, and services, leading to sustained high production costs that are not always matched by market prices for commodities like corn. The disconnect between inflation and corn prices has contributed to financial pressures on farmers, including increased bankruptcy filings in recent years. Tomorrow, Part 3 will dive deeper into the trends of individual cost items. Part 1, posted yesterday, evaluated costs relative to prices and breakeven levels for corn.