Economic Analysis

Digging in the Data Series

By Samuel Porter

For many Minnesotans and farmers, the spring was marked by discussion of increasing costs. The price of gasoline, diesel, and certainly fertilizer, have all been driven up by the closure of the Strait of Hormuz.  These price shocks sit in the context of farmers experiencing greater costs and declining profitability for several years in a row. Recent farm data presented here provides a window into how different costs are shaping farm profitability.   

Part 1 of this series looked at the revenue side of farm profitability: yield, price received, and farm size. The key findings were that yield explains most of the revenue-side difference, price plays a secondary but meaningful role, and size doesn’t predict who ends up at the top of the distribution. High-profit farms earn more per acre because of what they produce on that acre, not how many acres they have. 

This post looks at the cost side of the same FINBIN dataset. We’ll discuss spending differences between high- and low-profit farms, identifying gaps that appear to reflect operational efficiencies other data points that likely reflect longer-term structural pressures. 

The University of Minnesota’s Center for Farm Financial Management maintains one of the most detailed farm-level datasets in the country through its FINBIN database. Using the most recent eight years of FINBIN records (2018–2025), we look at corn and soybean enterprises across the state by the same profitability quintiles used in Part 1: the lowest-profitability enterprises (bottom 20%), middle-low (20–40%), middle (40–60%), mid-high (60–80%), and the highest-profitability enterprises (top 20%). 

As in Part 1, these results are not a prescription for success. Individual farm outcomes vary widely from year to year, and no two farms are the same.  The specific context, land base, debt structure, soils, weather, and management history all matter. While patterns presented here do not prescribe what any one farm should do, they provide insight on cost structures across the profitability distribution and identify the pressures driving overarching profitability differences among many row crop farms in Minnesota.  

Key Findings:

1. Costs have gone up. Production costs rose sharply during the 2021–2022 commodity boom and have not returned to pre-boom levels. 
2. Expenses now explain most of the profitability gap. Revenue differences still matter, but cost differences account for a larger share of the gap. 
3. The cost gap has two parts. Some differences reflect operational efficiency; others reflect structural land-cost differences tied to ownership, debt, and rent. 
4. Land tenure matters. Owned and rented land carry different cost structures, and those differences shape how farms experience tight margins. 

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Costs have grown over time

Production costs for corn and soybeans rose sharply through the 2021–2022 commodity boom and have not retreated to pre-boom levels (Figure 1). Grain prices, meanwhile, have come back down. The result is a third consecutive year of compressed margins — and, for many Minnesota row-crop operations, near-zero or negative net returns. 

Figure 2 shows that the cost picture is not uniform across expense categories. Fertilizer costs have eased from their 2022–2023 highs, but they remain far above pre-2021 levels (and are expected to be at record highs in 2026). Notably, the same broad pattern holds across other major expenses: costs have moderated in some areas, but the overall cost structure is still much higher than it was several years ago. Importantly, farms are not all experiencing these pressures in the same way, and that variation offers insight into how the farm economy is evolving. 

Costs are driving the profitability gap 

Costs now account for a larger share of the profitability gap than revenue differences do. Here, the profitability gap refers to the difference in net returns per acre between higher-profit and lower-profit enterprises. Part 1 showed that high-profit corn farms produce roughly 35–50 more bushels per acre than low-profit farms and receive a slightly higher price. But those revenue advantages explain only 28% of the total profitability difference between the highest- and lowest-profit corn groups. 

The remaining 72% is explained by cost differences. High-profit corn farms spent approximately $189 per acre less than low-profit farms in 2025. That difference in input costs— not how much they grew or what price they received — is now driving the profitability difference. And this represents a structural shift: a decade ago, the revenue and cost contributions to the profitability gap were roughly equal. By 2025, costs account for nearly three-quarters of it. 

Differences in Operational Costs

One piece of the cost gap – the difference in what high and low profitability farms spend – falls under operational efficiency; how farms manage variable inputs and costs. On owned-land corn farms, the high-profit group spends about $30 per acre less on fertilizer than the low-profit group, $14 per acre less on machinery depreciation, and $16 per acre less on repairs. That’s roughly $60 per acre in operational cost differences. When statewide corn returns are near breakeven before government payments, a $60 per acre can be enough to determine whether an enterprise finishes above or below zero. 

The difference in fertilizer expenditure deserves a closer look. The FINBIN data does not reveal if high-profit farms have lower fertilizer expenditures because they pay lower prices, apply lower rates, use different products, or some combination of these factors. What the data does show is that high-profit farms consistently report lower fertilizer expense per acre, and that gap has widened in recent years (Figure 3).  

High-profit corn enterprises are notably not the lowest spenders across every input category, suggesting that profitability is not entirely a result of scale or cost cutting. While elevated fertilizer prices play a role, the fertilizer gap may in-part be explained by more efficient input use – with high-profit farms avoiding fertilizer applications that do not generate enough additional yield or revenue to justify the cost. The strategic opportunity is not simply to minimize fertilizer costs, but to improve the return from each dollar spent. Benchmarking costs against comparable farms, refining soil-test-based rates, accounting for nitrogen credits, and evaluating application timing and placement can improve nutrient efficiency while protecting yield potential and margins. 

Land Costs and Structural Differences 

The second component of profitability differences is land cost – and this is where the story gets more complicated. The $60-per-acre operational gap described above is meaningful, but much smaller than the land-cost gap between high and low-profit farms. And unlike fertilizer rates or repair bills, owned land costs are shaped heavily by decisions made years ago: when the land was acquired, at what price, and how it was financed. 

Owned land costs

For owned-land operations, the greatest land expense is interest on mortgage debt.  For these corn enterprises, the difference in annual interest costs between the high- and low-profit groups is about $116 per acre – larger than the combined operational cost gap described above. For owned-land soybean enterprises, the interest expense gap is about $128 per acre. These differences likely reflect variation in leverage, land purchase timing, and land purchase price across farms. 

To illustrate this difference, consider two farms that each own 500 acres. A farm that purchased land at $8,000 per acre, financed 70% of the purchase with debt, and pays 5.5% interest would carry much higher annual interest costs than a farm that purchased comparable land earlier at $4,000 per acre and has paid down most of its mortgage – a gap on the order of $31 per acre.  That difference is not a result of yield, fertilizer, machinery, or soil quality. It merely reflects when land was purchased, the price paid, the amount financed, and the interest rate environment. These dynamics create real barriers for operations expanding under high interest rates, and especially for beginning farmers without established equity or capital. 

Rented land costs

For cash-rent enterprises – that is farmers who pay a per-acre rent – the annual land cost is rent rather than interest, and the picture is different. The gap in rent between high- and low-profit cash-rent corn farms is approximately $30 per acre – roughly one-fourth the owned-land interest gap. Rent can be renegotiated; it adjusts, with some lag, when commodity price environments shift. The interest burden on owned land doesn’t. This structural difference helps explain why the profitability gap on owned-land farms ($338/acre for corn in 2025) is wider than on cash-rent farms ($270/acre); owned-land farms are carrying land obligations that were locked in at different times and different debt levels, and those obligations don’t change when margins compress. 

That said, cash rent is not without its own pressures. Even with the structural burdens of owned land, the cost per acre of farming owned land is on average 8% less than on rented land (Figure 4).  Rent levels rose sharply during the commodity boom and have been slow to retreat (Figure 4). Landlords, understandably, are reluctant to reduce rents after locking in higher rates. For cash-rent operators, rent agreements can provide flexibility in high-interest and high-land-cost environments, but over the long term, rented land does not build equity or provide the same assurance of continued access to farmable acres.  

In conclusion

Taken together, the findings here point to two cost structures that have very different causes and different remedies. The first is operational: fertilizer efficiency, machinery investment, repair costs. These gaps appear consistently across years, suggesting they reflect genuine management and agronomic differences. They are, in principle, addressable with time and focus. 

The second is structural land costs: land debt obligations locked in at purchase that don’t adjust to current commodity prices or margins. Owned-land farms usually benefit from lower costs, but today’s land price dynamics are creating an even larger profitability divide. On owned-land low-profitability corn farms, overhead costs – interest, taxes, depreciation, insurance – account for roughly 40% of total costs. For owned-land soybean farms in the low profitability group, that share reaches 51.8%. More than half of every dollar spent goes to fixed obligations before a single seed goes in the ground. A farm in that position faces a fundamentally different financial problem than one with high fertilizer costs, and the remedies differ accordingly. Correctly distinguishing between operational and structural cost pressure matters for diagnosis: for producers assessing their own financial position, for lenders evaluating risk, and for policymakers considering what forms of support reach the farms under the most strain. 

What we haven’t yet tackled is the third layer of this story — how government farm program payments interact with profitability across groups — will be the subject of Part 3 of this series. If you have questions or thoughts, please reach out. 

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A note on methodology: Profitability groups are redefined each year based on that year’s distribution of net returns across FINBIN farms. A farm in the Low group in 2025 may have been Middle or High in prior years. These are annual cross-sectional rankings, not fixed categories. Year-to-year movement across groups is common, which is an important reminder that the patterns described here reflect broad structural differences, not permanent distinctions between different types of farms. This means the analysis identifies patterns associated with profitability groups, not permanent traits of individual farms. 

Read More about Farming in Tough Times: Lessons on Profitability (Part 2) 

Digging in the Data Series

By Samuel Porter

At the Commodity Classic and the National Farmers Union Convention last month, one theme stood out above all others: the strain on today’s agricultural economy. Headlines and USDA reports tell the same story – grain prices are under pressure, input costs are at record high, and farm financial stress is rising.  

In this environment, profitability doesn’t come easy. And farmers have to be more intentional than ever, looking for every opportunity to reduce costs and improve returns. As one producer told me in San Antonio, “we can’t be lazy when there is $4 corn.”  

One of the most effective ways to understand where profits are being made – or lost – is to dig into the data. Minnesota is uniquely positioned in this regard. The University of Minnesota’s Center for Farm Financial Management maintains one of the most robust farm-level datasets in the country through its FINBIN database. Using five years of FINBIN records (2020-2024), we can analyze farm finances across different production types. For this analysis, we’ll look at corn and soybean enterprises across the state by profitability quintiles: the lowest profitability enterprises in the data (bottom 20%), middle low (20-40%), middle (40-60%), mid-high (60-80%), and the highest profitable enterprises (top 20%).  A forthcoming Part 2 of this post will look at costs of production, but here we look at the characteristics of farm outputs and size.  

Of course, no dataset tells the full story, just like no two farms are the same. Individual farm outcomes vary widely from year to year. Management decisions change, crop rotations shift, marketing strategies differ, and weather remains unpredictable. These results should not be interpreted as a prescription for success. However, they do provide valuable insight into the characteristics that tend to separate higher- and lower-profit farms.   

Three Key Findings Emerge: 

1. Yield is the dominant driver of profitability 
2. Higher-profit farms tend to receive better prices
3. Larger farm-size does not determine higher profitability 

Yield is the primary factor 

Yield stands out as the single most important driver of profitability on the revenue side (Figure 1). While this may seem obvious, the magnitude is notable – yield explains over 45% of the revenue gap between the highest and lowest-performing farms. For corn, the spread between the top and bottom quintiles has ranged from roughly 35 to 50 bushels per acre, year over year. Weather, geography, and inherent soil certainly influence yield and are largely outside a producer’s control. Nonetheless, the consistency of this yield gap across five years, across varying weather conditions, points to management playing a meaningful role alongside those structural factors. This raises important questions about managing marginal land and identifying opportunities to improve agronomic efficiency across operations. 

Marketing matters 

Higher-profit farms consistently receive better prices for corn. Although the impact on profitability is smaller than yield, it remains meaningful. Higher prices captured by more profitable farms accounts for roughly 15% of the profitability gap between the top and bottom groups. This suggests that marketing strategy, timing, and possibly access to different buyers or contracts can play a measurable role in farm performance. What strategies are taken for forward contracting, basis management, or farmers’ access to premium markets isn’t fully captured in this data. But the consistency of the premium across all five years suggests it isn’t random. Marketing strategy, timing, and access to buyers all appear to play a measurable role – and though the gap narrows, it persists even in years when overall corn prices are compressed.

Scale doesn’t predict profitability 

One notable finding in the MN FINBIN enterprises is that size is not a driver of profitability. In every year, both in corn and soybeans (Figures 3 and 4), higher-profit farms are not consistently larger. Scale can help with efficiency, it can lower per-unit costs on some inputs and shouldn’t be dismissed. But in the FINBIN data, it doesn’t translate into consistently higher profit. What the top-performing farms share is performance on the acre, not how many acres they have. This challenges a common assumption that “getting bigger” is the path to financial resilience. It may be one path, under the right conditions. But the farms at the top of the profitability distribution are there because of what they do on their acres – not how many acres they manage. 

Soybeans tell a similar story  

For soybeans, yield again emerges as the dominant factor (Figure 4) – and in many cases, the spread between low and high-profit farms is even more pronounced than in corn. Differences in soybean yields across profitability groups are large and consistent across years, driving a substantial share of the gap in returns per acre.   

In contrast, differences in price received for soybeans are generally smaller than in corn. While higher-profit farms still tend to receive slightly better prices, the range is tighter. As a result, yield accounts for a larger share of the profitability differences in soybeans, while marketing plays a somewhat smaller – though still important – role. 

In summary and what questions remain  

Taken together, these results point to yield as a primary driver of profitability, followed by price, while size plays a much smaller role. Not all of these factors are within a producer’s control – weather, soil, and location matter. Nonetheless, the consistent differences across farms suggest management decisions still play a meaningful role. In a tighter-margin environment, the corn and soybean farms that perform best are not necessarily the biggest, but those that execute well where it counts – maintaining strong yields, capturing better prices, and allocating resources effectively. 

This is the first blog post analyzing Minnesota’s FINBIN data and it is only scratching the surface of what this dataset can help us understand. These results are about the revenue side. But a farm’s profitability is also shaped by what it spends – input costs, labor, land, equipment. This will be the subject of Part 2, which will look at the cost side of the FINBIN data: what high- and low-profit farms spend differently, where the efficiency gaps are, and what cost-per-bushel looks like across quintiles. And of course, Minnesota farmers operate across different scales and types of production. If you have questions or thoughts about what future analysis could help us understand, please do reach out.  

Read More about Farming in Tough Times: Lessons on Profitability (Part 1) 

The Iran conflict continues to evolve rapidly. With the closure of the Strait of Hormuz (Associated Press 3/11) and attacks on both Iran and Qatar’s gas production facilities (NYTimes 3/18) international oil prices have soared. March Brent Crude oil prices have averaged over $98 a barrel – a 37% increase over February. Asian LNG markets have also risen sharply, though U.S. LNG prices have remained relatively stable (EIA, 3/10), largely because domestic supply and export capacity were already high. 

Agricultural production expenses had already been projected to be at a historic high for 2026 (ERS 2/5). Thus, the potential for further price increases has the agricultural community on alert. Oil and gas are directly and indirectly essential agriculture inputs. Directly, fuel is an important piece of a farm operations itself –  accounting for about 3.5% of total input costs in Minnesota corn production, or roughly $30 per acre. Indirectly, fertilizer prices are closely linked to natural gas markets and often represent the largest single expense in row-crop systems, making up about 20% of total input costs in Minnesota corn production. We are currently seeing retail fertilizer prices increase. Urea is 11% higher than a month ago and Anhydrous is 8% more expensive relative to last month (DTN 3/25). The U.S. currently produces roughly 80% of nitrogen fertilizer domestically (ERS 2025), thus we don’t expect to see as big of a shock to fertilizer costs as Asian markets. Nonetheless, the increase in fertilizer expense for what was already the most expensive item on the balance sheet is expected to add further pressure to farm profitability.  

In acknowledgement of both the current conflict and the uptick in fertilizer costs over the last decade, Senator Klobuchar, joined by Senators Thune and Marshall, introduced bipartisan legislation aimed at increasing fertilizer price transparency and lowering fertilizer costs creating mandatory price reporting.

Finally, grain markets are beginning to respond, driven by expectations of higher production costs, tighter supply conditions, and possible trade disruptions. Over the coming weeks and months, prices will be influenced by transportation costs, shifts in global commodity supply, and rising agricultural production costs outside North America. March brought a broad upward move in grain markets, but the biggest immediate strength was in wheat, while corn and soybeans showed more of their strength in the futures market than in spot cash prices (Figure 2). That said, futures markets reflect speculations. Much will depend on how the conflict develops, whether supply disruptions persist, and how producers and traders adjust over the rest of the year. 

Read More about Iran Conflict and Possible Impacts on Agriculture Markets

MFU Market Update

By Samuel Porter

New USDA National Agricultural Statistics Service(NASS) data has been released from the Tenure, Ownership, and Transition of Agricultural Land survey. As reported by Todd Neeley in Progressive Farmer, 80% of the national rented farmland is owned by non-farmers, and a mere 5% of existing farmland is expected to transfer ownership in the next 5 years.

The data does not provide state-specific information, but it does provide region-level statistics, which I’ve analyzed for the Midwest. Here in the Midwest, we see that 346,000 farmland landlords (50.2% of farmland landlords) have never farmed – owning 23.8 million acres – while 37.1% of landlords are retired from farming and 12.7% are actively farming.

We also learn that 18 million acres in the Midwest are expected to change hands in the next 5 years. However, few of these acres are going to be openly for sale, with 86% going into trust. 10% of the expected transferred acres over the next 5 years (or 1.87million acres) will be openly for sale, and the remaining 4 percent will be for sale to family members.  

Finally, the data shows that midwestern farmland rentals are primarily structured as fixed cash leases, and share leases – which tie rent to yield – cover only 14% of acres. Most of the tenants are long term, with only 19.9% of the tenants having been with the landlord less than 5 years – suggesting stable (and relatively illiquid) lease markets that do not shift frequently.  

Minnesota’s corporate farm law notably keeps corporations from owning farmland. However, MFU has continued pushing for more action on land prices, including through recent testimony from Vice President Anne Schwagerl on a bill to require a Minnesota land trends report. 

“I’ve even seen ads on Facebook and Instagram saying things like, ‘Invest in farmland—you’ll get better returns than the stock market,’” Schwagerl told members of the House Agriculture Committee. “I certainly notice those, and I find them concerning.” 

Read More about USDA Data Sheds Light on Farmland Landlords, Ownership, and Transfers