U.S. farmers face credit crisis amid Iran war fallout
Across the Corn Belt and the Great Plains, spring planting season arrived this year with a financial burden that many producers cannot manage on their own.
Diesel fuel and commercial fertilizer prices have climbed sharply since the closure of the Strait of Hormuz in late February.
The timing could not be worse for an agricultural sector already carrying record levels of debt after three consecutive years of shrinking margins.
The result is a credit squeeze that extends from farm gates in rural Nebraska to the lending desks of regional agricultural banks, raising difficult questions about which operations will survive the season and which will not.
Farm debt hits a record $624.7 billion as operating costs surge
Total farm sector debt is projected to climb 5.2% this year to a record $624.7 billion, driven largely by the need for additional lines of credit to cover rising input costs rather than productive investment, the U.S. Department of Agriculture estimated in its February forecast.
The volume of new farm operating loans jumped nearly 40% year over year in the fourth quarter of 2025, and the average size of each loan reached an all-time high, the Federal Reserve Bank of Kansas City reported in January.
Farmers are not borrowing to grow their businesses or upgrade equipment; they are borrowing to keep the lights on and the planters moving, the Kansas City Fed data showed.
Interest expenses across the farm economy are expected to reach a record $33 billion in 2026, compounding the pressure on operations that are already spending more to grow crops than they will earn from selling them, according to AFBF's Market Intel analysis.
Strait of Hormuz closure drives fertilizer and fuel costs higher
Before the conflict began on Feb. 28, 2026, roughly one-fifth of the world's oil supply and a significant share of global fertilizer ingredients passed daily through the Strait of Hormuz, the narrow waterway between Iran and Oman that connects the Persian Gulf to the open ocean.
Urea (a type of fertilizer) prices in the United States rose 47% from late February to early April, the largest month-to-month percentage increase on record for that input,according to the American Farm Bureau Federation's April Market Intel analysis.
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A recent survey of 5,700 producers conducted by the American Farm Bureau Federation found that roughly two-thirds (65%) of respondents could not afford all the fertilizer they needed for the current planting season, and nearly 60% said their financial positions had worsened due to rising fertilizer and fuel costs.
The USDA projects that corn will cost approximately $5 per bushel to produce this year but sell for roughly $4.20, and soybeans face a similar gap, with production costs of $ 12.27 and expected revenue of $10.30, the agency indicated in its 2026 outlook.
Farm bankruptcies climb 46% as lenders tighten their standards
Chapter 12 farm bankruptcy filings reached 315 in 2025, a 46% increase from the prior year, and the trajectory suggests continued distress through at least 2027, the American Farm Bureau Federation confirmed in its analysis of federal court data.
The Farm Credit System, a federally chartered network, held 45.82% of all U.S. agricultural debt in 2023, making it the country's single largest agricultural lender, according to USDA Farm Income and Wealth Statistics analyzed by farmdoc daily.
It's going to be frustrating to the farm producers. They would prefer to get it from the market than from the government
Regional bankers are responding by restructuring more loans, increasing collateral requirements, and preparing for a wave of foreclosure proceedings, the legal advisory firm Adams and Reese warned in a March bulletin directed at financial institutions serving the agricultural sector.
Southern states such as Arkansas and Georgia recorded the highest numbers of Chapter 12 filings, largely because rice producers in those regions have received less federal emergency support than Midwestern commodity crop growers, Featherstone explained to Capital Press.
Federal aid and the 2026 Farm Bill face mounting pressure
The Trump administration announced $12 billion in aid to farmers in December 2025, but agricultural economists and producers say those funds have largely been absorbed by higher production costs that followed the start of the conflict with Iran.
"Those $12 billion payments went out, and a lot of producers were applying that as principal on their loans," Dennis McKinney, a farmer and cattle producer in Greensburg, Kansas, told Salon in April.
He also added that the money now has to be redirected toward financing higher input costs for the current planting season.
The Farm, Food, and National Security Act of 2026 passed the full House on April 30 by a vote of 224–200 after clearing the Agriculture Committee in March.
The bill includes provisions to authorize USDA to restructure guaranteed loan debt and to expedite approval for loans under $1 million, the National Sustainable Agriculture Coalition confirmed in its analysis of the legislation.
For the average household, the practical consequence of this agricultural credit crisis is direct: when farmers cannot afford to plant full crops or must reduce fertilizer applications, yields drop, supply tightens, and grocery prices rise in the months that follow.
The farm credit crisis extends beyond the farm gate
The ripple effect extends well beyond the farm gate because agricultural distress is now intersecting with a broader tightening of credit standards across the economy, which the Iran conflict has helped accelerate throughout the spring.
The financial strain spreading through rural America reflects more than a difficult growing season.
Rising fuel and fertilizer costs, record borrowing levels, and tightening credit conditions are converging at a moment when many farm operations are already operating with little margin for error.
As lenders grow more cautious and bankruptcy filings increase, the pressure is beginning to extend beyond agricultural communities into food supply chains, regional banks, and household grocery budgets.
Related: Iran war threatens fragile job market
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This story was originally published May 27, 2026 at 1:17 PM.