Editor’s note: This story is part of an ongoing series called “Smart Moves for 2027,” which outlines steps to guide farmers in the coming year.
2026 contained a treasure trove of travails for Iowa farmers. Too little or too much rain. Tariffs that confounded agricultural trade. Stubbornly sticky input prices.
But you know what? This year is shaping up to be a decent one for many Iowa farmers.
“We believe 2026 is going to be better than 2025, and it’s going to turn out a lot better than what we thought in mid-summer this year,” said Jim Knuth, senior vice president of Farm Credit Services of America.
Granted, not all is rainbows and puppies. Trade troubles and high input prices remain. Still, some optimism reigns as farmers plan for 2027.
Why the positive outlook?
Abundant corn and soybean crops have helped bulge Iowa farmers’ bottom lines.
“If you look at the national map, Iowa's a bit of a garden spot,” Knuth said. “Iowa is predicted to have above trend-line yields. A lot of other states are in the red, with below trend-line yields for a variety of reasons. We will have the bushels.”
This aligns with a preharvest rally that gave farmers an opportunity to price product at unexpectedly high levels, before USDA’s Sept. 30 quarterly Grain Stocks report chilled corn prices.
“The preharvest rally was unusual and unexpected, but very welcome,” Knuth said.
Farmers also received generous government payments, as 2026 may rival 2020 for record highs. Earlier this year, farmers received $12 billion in Farmer Bridge Assistance payments for 2025 crops. This fall, farmers received $13.8 billion in Price Loss Coverage and Agriculture Risk Coverage crop insurance payments for 2025 — the largest since these plans were established in the 2014 Farm Bill.
In October, the Trump administration announced an $8 billion package to alleviate high diesel fuel costs for farmers.
All this bodes well for working capital — the money remaining when current liabilities are subtracted from current assets.
“We think that in 2026, many farmers will be able to retain or even add to their working capital positions if they manage their operations correctly,” Knuth said. “We also have not seen utilization spikes in our lines of credit, which tells you that working capital is still there.”
What could go wrong?
Well, spiraling input costs still rule. That’s partially due to the conflict between the U.S. and Iran, since it threatens shipping through the Strait of Hormuz.
“I do think there's some opportunity for [input price] relief, but the U.S.-Iran conflict has to resolve itself first,” Knuth said. “This is a real wild card as we look forward, in terms of fuel and fertilizer prices. A lot of times we can lock in prices this time of year, but a lot of the co-ops tell us they can’t even give a price out yet.”
Still, some sunlight may be peeking into the fertilizer situation.
“If we look at the affordability of nutrients today versus last year, things look better today in my view,” said Sam Taylor, a Rabobank senior analyst for farm inputs.
The good news is that phosphates have been stable in price, climbing just 5% over last year, Taylor said. A decrease in demand for ammonia — and, therefore, a decrease in urea prices — has occurred since this summer.
However, urea prices are up 24% over last year on the retail level, Taylor noted, and prices could move upward prior to planting with Brazil importing urea and ammonium sulfate for its growing season.
“I think there will be some upside on urea pricing between now and spring as well,” Taylor said. “At present, you would not do too badly if you locked in some pricing on urea compared to in spring.”
How to cope with inflation
The U.S.-Iran conflict isn’t the only reason for rising prices.
“Think about what happened during COVID,” said Stephen Nicholson, head of crops at Rabobank North America. “The Trump administration and the Biden administration sent money to consumers. So, what did consumers do? They spent it. This created more money chasing fewer goods. It was a classic example of inflation.”
This applies to what’s currently happening in agriculture with government and crop insurance payments.
“Farmers will say, ‘I want the money, but it just keeps inflating all the inputs I already have,’” Nicholson said.
Dave Walton, a Wilton, Iowa, farmer who serves as vice president of the American Soybean Association, sees this occurring on his farm.
“A lot of these aid packages we've seen have really been a pass-through [to input suppliers],” he said. “Not much of that ends up in my pocket.”
Meanwhile, tariffs also inflate input costs.
“If you’re importing farm machinery or steel from Canada that has a 50% tariff, you’re making it more expensive for farmers,” Nicholson said.
Seed price increases are on a different trajectory, he added. In economic terms, prices are inelastic, meaning movement isn’t influenced by other economic changes.
Nicholson pointed out that it’s possible to delay a machinery purchase. Farmers may forgo phosphorus and potassium applications on high-testing soils. They may nix a fungicide application in a light disease year.
“But you can’t have a crop without seed,” Nicholson said.
What’s the answer?
Part of the solution is robust agricultural trade, Walton said. He noted that rather than aid packages that can fuel inflation, farmers want to garner income from the market.
One positive factor is that relationships with export customers remain strong, even despite a trade war.
“Those person-to-person, business-to-business relationships are still there,” Walton said. “It’s more of a government issue, such as between the U.S. and China. [The trade war] has definitely cooled the relationship, but if we can get an agreement between the two countries, trade should go back to where it was.”
Management is key, too. Rallies such as the one that occurred this year prior to harvest gave farmers a chance to significantly enhance their revenues.
“You don’t have to sell the whole farm, but do something,” Nicholson said. “Don’t miss an opportunity.”
Knuth added that this inflationary environment fuels persistent margin compression. This is a phenomenon that reduces profit margins due to costs rising faster than revenues. In this environment, margin is rewarded more than scale.
“In other words, better is rewarded, not bigger,” Knuth said. “When margin is rewarded more than scale, the key differentiator in farming today is management. Our most successful producers just really look at every single line item. It’s not just one big solution. And everything is on the table, and everything's negotiable. Those producers will continue to be successful in this environment.”