2025 Edition

Printable Version: SOC 3104C_2025

This publication summarizes current farm trends in Iowa between 2014 and 2024, with a forecast for 2025. Indicators are taken from USDA’s Agricultural Resource Management Survey. Incomes and sales are inflation adjusted. Farms are defined as having $1,000 or more of agricultural production. Retirement farms have operators who are retired with gross cash farm income (GCFI) under $350,000. Lifestyle farms have operators with a non-farm occupation and GCFI under $350,000, plus farmers with GCFI under $150,000. Small farms are farmers with GCFI between $150,000 and $349,999. Midsize commercial farms have GCFI between $350,000 and $999,999. Large commercial farms have $1 million or more in GCFI. Non-family farms are owned and operated by unrelated persons, such as investors or corporations.

Farms, Farmland, and Production Value

Most of Iowa’s farms are places to live, not to work. Iowa had about 86,725 farms in 2025, down -1.5% from a decade ago in 2014. Just over 61% of Iowa’s farms are places to live rather than to make a living, operated by people that have a non-farm job (47%) or who are retired (14%). Despite large numbers, lifestyle and retirement farms only account for 21.7% of farmland (129 acres per farm) and generate only 11% of agricultural production value. Commercial family farms drive Iowa agriculture. These 21,370 operations make up only 24.6% of farms, but operate 63% of farmland and generate 75% of sales or production value.

Small farms holding on, midsize farms in decline. Acres operated by small farms have rebounded since 2021 (growing from 310 to 470 acres per farm), although farm numbers are stable over time. On the other hand, midsize farms saw a sharp reduction in acres and a slow loss of operations, resulting in average farm size falling from 805 to 647 acres since 2014. Both small and midsize operations have seen their share of production value fall, especially midsize farms.

Rapid rise in non-family farms. Non-family operations jumped by over 250% since 2014, rising from just 1.3% of operations to 5% today. These 4,350 operations contribute a growing portion of sales in Iowa, but do not yet operate a large share of farmland at present.

Large farms becoming the norm in Iowa. Since 2021, large commercial farms have operated the most farmland and generated the most sales, replacing midsize farms that have traditionally dominated Iowa agriculture. The overall trend indicates large farms and non-family operations will grow at the expense of midsize farms.

Net Farm Income and Farm Profitability

Net farm income is the profit or loss of the farm operation from the farmer’s labor, management, and capital after expenses. It is the difference between farm income less production expenses, plus depreciation and inventory changes. Net operating profit margin is the ability of the farm to finance ongoing operations, expressed as a percentage. It takes net farm income, adds interest expenses and subtracts unpaid operator labor, then divides this number by the value of farm production (consisting of gross cash farm income and value of inventory changes). Margins below 10% is a signal the farm is not generating enough profits to be viable long-term, meaning the business is less able to replace assets, cover unpaid expenses, expand operations, or absorb unexpected price changes.

 Farm incomes down in 2025. Small and midsize farms fared the worst. Across the board, net farm incomes fell between 2024 and 2025, and are sharply down from near-record highs in 2021. Small farm incomes fell 46% last year and 77% from five years ago, down to only $27,660 today. Similarly, midsize farm incomes shrank 34% from 2024 and 67% from 2021, down to $83,740.

On the other hand, losses on large farm and non-family operations was less severe. Large farm incomes were $481,040, 15.6% lower than a year ago and 43% lower than five years ago. Owners of non-family operations experienced negligible losses of only 2.8% last year, posting a net farm income of $91,410. However, incomes are down nearly 90% from a record high set in 2021.

Only non-family and large farms profitable in 2025. Non-family operations are highly profitable (21.7%) and margins have increased each year since 2018, making these farms financially secure. Every dollar of farm production returns 21.7 cents in profit to non-family operations. Although large family farms managed to be profitable last year (12.7%), margins have steadily fallen since 2021. Today, large farms generate 12.7 cents in profit per dollar of production. A weak farm economy in 2026 could push these operations below 10%.

All other farm classes are below minimum profitability, and margins have worsened since 2021 when farm prices were high. Midsize farm profitability was cut in half, falling from 12% to only 6% over the last year (or 6.2 cents profit per production dollar). Small farms operate at a loss in 2025. Small family farm broke even in 2024 (no profit), and now operate at a 7% loss in 2025. This means small farms end up losing 7.1 cents per dollar of production, with most losses coming from falling value of on-farm inventories rather than sales. Lifestyle farms have operated at a loss for the past decade, but sizable off-farm income is able to cover costs.

Farm Debt

Debt repayment capacity utilization (DCRU) rates measure actual debt as a percent of the farm’s maximum feasible debt load. Values nearing 100% indicate the farm cannot take on additional debt to finance operations; and/or the farm will have difficulty paying existing debt obligations. Debt to asset ratios measure the percent of farm assets owed to creditors to cover outstanding obligations. Higher values indicate more of the farm’s assets are financed by debt instead of farmer equity. In general, ratios under 30% indicate average debt, while ratios over 50% indicate high debt loads.

Debt usage jumped last year, but debt to asset ratios low. Small farms saw the largest increase in debt usage, rising 25 points last year to 85% of maximum feasible debt. Midsize farms saw debt usage rise from 65% to 85%, a 16 point gain. If low prices and high input costs persist into 2026, small and midsize debt level could approach 100%, leaving little financial cushion. However, most debt is secured by high value assets, notably farmland, resulting in low debt to asset ratios ranging from 6% and 12%.

Potential debt problem for large commercial family farms. Large farms are in a more precarious debt situation. Debt usage rose from 77% to 95% last year; and debt to asset ratios rose to nearly 27%—much higher than other size classes. This suggests large farms are relying on debt to cover lower farm prices and higher input costs. One reason for growing debt is lower profit margins, meaning large farms cannot generate enough cash or liquid assets to cover shortfalls.

Household Income for Farm Families

Farm incomes down, off-farm work up—except for lifestyle farms. Farm household income counts both farm and non-farm sources. Retired farm families were hardest hit last year, experiencing a 45% drop in income from both farm and non-farm sources, the latter including retirement income. Farm families running large operations saw household income fall by 14.7%, nearly all from farm sources. Midsize farm families saw a similar fall in income at 14.5%. Farm income fell by 26%, but off-farm income grew by 11.5% to cover about half of farm losses. In other words, family members took off-farm jobs to support the household and farm business.

Strong non-farm economy supports agriculture. Lifestyle farms earn 90% of their income in the non-farm rural economy, while still maintaining a link to agriculture. For small and midsize family farms, off-farm work is a necessity to stay in business. Small farms earn 58% of income off-farm, supporting young producers, beginning farmers, and niche commodities. For midsize farms, a weak farm economy has increased the need for off-farm work and income, rising from 26% to 42% over the past decade.

Implications

There is no single “farm economy” in Iowa. In actuality, our state has two agricultural systems, necessitating two different policy responses from state government. One system is lifestyle agriculture, which accounts for over 60% of Iowa’s farms, but contributes only a small share to farm production. These farms contribute to rural development by keeping rural schools open, helping Main Street businesses thrive, and preserving Iowa’s agricultural heritage. Lifestyle farms also help address rural workforce shortages, allowing people to work non-farm jobs and still live in farming communities.

The other system is commercial agriculture, which accounts for only 25% of farms, but operates two-thirds of Iowa’s farmland and produces three-quarters of all sales. These farms drive the farm economy, feed the world, and create spin-off jobs in other sectors of the Iowa’s economy. Examples include agriculture-related products and services in manufacturing (chemicals, machinery, and food) and insurance and finance. However, large family farms are becoming the norm, replacing midsize family farms that have traditionally dominated Iowa agriculture. The rapid rise in non-family or corporate-owned farm operations is also of concern.

The downturn in the farm economy last year shrank net farm incomes, cut profitability, and increased debt across all farm classes. Large family farms in Iowa were particularly hard hit. This was caused by sweeping protective tariffs on nearly all goods imported into the U.S., enacted in early 2025, that increased input costs. The U.S.-China trade war reignited retaliatory tariffs and import bans, which heavily impacted row crop operations who depend on exports. Economic uncertainty raised yields on U.S. Treasury notes, resulting in higher interest rates for farmers.

On a positive note, the Farm Bill was partially reauthorized in summer 2025, expanding farm price supports and crop insurance subsidies; and USDA issued $11 billion in payments to farmers to compensate for trade war losses. Rising farmland values has taken the worry off rising debt, as debt to assets ratios are very low.

The outlook for 2026 is uncertain, as tariffs remain in place and trade wars could resume. In particular, the U.S.-Iran war has not been resolved, keeping fuel and fertilizer prices high.

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Analysis and writing by:
Dr. David Peters, Professor and Extension State Specialist: Agriculture and Rural Policy
email: dpeters@iastate.edu | tel. 515-294-6303  

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