By Andi Anderson
Illinois grain farms are experiencing shifts in financial efficiency as interest rates and debt levels fluctuate. While the Economic Research Service (ERS) projects farm sector debt to rise by 3.7% in 2025, interest expenses are expected to decline, offering some relief to farmers.
The interest expense ratio, a measure of financial efficiency, indicates how much gross farm income goes toward interest payments on debt. Farms with an interest expense ratio below 5% are considered financially strong, while those exceeding 10% are vulnerable.
A study of Illinois grain farms categorizes them by size: small (gross returns below $350,000), medium ($350,000-$999,999), and large (above $999,999). Over the past two decades, larger farms have consistently reported higher interest expense ratios, indicating greater debt reliance.
From 2006 to 2012, median ratios declined, showing improved financial efficiency. However, between 2012 and 2019, the ratios rose as grain prices fell and debt increased. Large farms saw total liabilities rise by over 50%, while smaller farms had a slower debt increase.
By 2023, despite rising interest rates, median ratios for all farm sizes remained strong:
Small farms: 2.60%
Medium farms: 2.82%
Large farms: 3.27%
These figures indicate efficient financial management, even as economic uncertainties persist. Larger farms depend more on debt, but all farm sizes show similar financial trends over time.
As interest rate policies fluctuate, Indiana farmers must adopt proactive financial strategies to maintain profitability. With declining input costs and cautious debt management, grain farms can continue to navigate economic shifts effectively.
Photo Credit: gettyimages-shotbydave
Categories: Illinois, General