Normally, here is where you might find an analogy comparing troubles in farming with some other life situation. And while that is a useful writing tool, the fact is that an analogy doesn’t always capture the real things we need to explain.

And reality is that we are seeing a noticeable uptick in financial distress for farmers this year — not just in our own practice, but in farming overall. Corn and soybean prices are still down significantly from their 10-year high earlier this decade. Meanwhile, input costs for crop growers have not decreased at the same rate. Livestock overall is doing better in 2025, especially beef, but there are producers from these sectors also in the middle of bankruptcy proceedings.

Stay on top of financial shifts

If you planned to harvest corn at 200 bushels/acre and sell for $5/bushel, but you’re seeing only 180 bpa at $4.20, this is of course going to change your plans for the year. Continuing to hope things will improve as you harvest this month is a wonderful thing, but it will not make up lost income. That’s why you need to update your projections and plans as circumstances change.

If projections show revenue will be short, there are decisions to make. Do you have enough in savings to pay creditors such as the bank, a landlord, laborers, suppliers, et cetera? If not, can you tap an additional income stream?

Maybe you can sell your harvesting services to other growers in the area. And if you do this in Iowa, be sure to perfect a harvester’s lien with the state no later than 10 days after finishing the work, to ensure you are a priority to be paid timely, even if the farmer for whom you’re harvesting gets crossways with their bank). Or maybe you can pick up extra money hauling grain or livestock, driving a truck, packing silage, assisting with farm chores, or doing other temporary labor? Finding additional sources of income will protect the equity you’ve worked so hard to build over the years.

If you’re still struggling to meet your obligations, you may be tempted to finance this short-term debt by rolling it into next year’s operating loan or tapping your land’s equity. But remember, these incur additional interest — like rolling a snowball uphill. At some point that debt snowball grows so large that it will roll back over you.

Or, let’s say you’ve learned that you can sell grain for more than what you contracted with another party when you grew it. Or, you’re a month behind on rent and the landlord is pressuring you to pay when you also owe the bank a payment — the bank that holds collateral over your grain. These are both situations in which you may be tempted to seek a short-term solution to pay your most pressing debts, at the risk of legal action and penalties.

When your farm production is some creditor’s collateral, you need to be very careful and seek sound legal advice.

Don’t underestimate negotiation

If you took out a bank loan or operating line of credit, that lender usually takes a security interest in every bushel, bale, hundredweight of milk, or animal you produce, meaning it has first dibs if you do not repay the loan on time. There are exceptions, such as if someone has an aforementioned harvester’s lien for doing work on your land or your landlord perfected a landlord’s lien with the state.

We wrote about the pitfalls of selling collateral in a “rob Peter to pay Paul” debt-payoff scenario last fall, but it bears repeating: When your farm product is also collateral, you cannot unilaterally decide how to dispose of it or spend the proceeds. In addition to banks, harvesters, and landlords, certain vendors may also hold statutory liens on your crop or livestock.

Here at Ag & Business Legal Strategies, we’ve handled many cases in which a farmer liquidated the collateral they had pledged to others as collateral, then needed our assistance when consequences inevitably happened. One farmer sold his grain under another family member’s name so he could use the proceeds to pay off creditors other than the one that had a security interest in the grain.

Now he might not be able to discharge his debt to that creditor in a bankruptcy. Even more seriously, both he and the family member could be indicted for defrauding a financial institution — a federal felony — and possibly serve time in a federal penitentiary.

In another case, the farmer sealed grain with the government’s Commodity Credit Corporation (CCC). Instead of delivering that grain to an elevator and repaying the sealed loan, he sold it elsewhere to pay bills. Not only did he have to repay the CCC, he also paid a fine and was barred from applying for another CCC sealed grain loan for two years.

Yet another farmer created a limited liability corporation to sell his grain and tried to argue since that corporation didn’t owe any debts, it was free to sell the products. In all three of these cases, the collateral holders demanded their share; in fact, even after filing for bankruptcy, the third farmer will owe a six-figure debt that the bankruptcy court cannot discharge.

Prepare, don’t react

Our attorneys are certainly capable of providing representation for these kinds of cases — but we would rather help producers on the front end avoid fines, judgments, and possibly even jail time.

If it seems to be difficult to pay your bank or other creditors in full this season, Ag & Business Legal Strategies can assist in reviewing your options and finding the best solution that does not risk jail time or non-discharged debts if a bankruptcy is necessary. If you have a close relationship with your bank and know you’ll be receiving later income — for example, crop-loss insurance — and you can convince your loan officer to wait, that’s great! If not, we can reach out to your bank, or other creditors, to help you set up a payment plan.

We’ve said here many times that you need to maintain several key financial documents. These include an accurate balance sheet; a cash flow; and a profit and loss statement. The balance sheet shows your assets, debts, and equity. The cash flow reflects if there is sufficient liquidity available to pay bills in a timely fashion. And, true to its name, the profit and loss statement projects whether you will experience a profit or a loss.

These documents are necessary when preparing to talk with creditors about your situation, since one of the first things they’ll ask is why you’re short on income and what collateral you can use to secure a new loan. It’s also something we want clients to do for us; the more accurate your information to pinpoint the source of your shortfall, the sooner we can help.

Some ag finance and economics experts have recently noted the current U.S. farm debt and income situation bears some resemblance to the 1980s Farm Crisis, with farmers being squeezed by high rents and inputs, with low commodity prices. The following shows a comparison of prices for corn and soybeans in 1985 and today:

If you’re facing a shortfall, rising debt, or just uncertainty about your farm’s financial future, see how we can assist.

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At Ag & Business Legal Strategies, we want our clients to be honest with themselves and have a solid business plan. Our team will help you create and execute that business plan, and, if necessary, assist you with the legal, tax, and practical aspects of debt restructuring or bankruptcy.

Don’t wait for the problems to become insurmountable. Connect with someone you can trust today, not tomorrow, when it may be too late.