What You Need to Know:
- Structural Evolution: This downturn is a permanent market shift, not just a temporary cycle.
- Friend-Shoring: Trade is moving toward geopolitical allies to ensure supply chain resilience.
- Aggressive Cost-Cutting: Farmers are doubling generic input use and delaying machinery purchases to protect margins.
- Financial Resilience: Better management and working capital make today far more stable than the 1980s.
- Premium Protein Demand: GLP-1 medications are driving consumers toward smaller, higher-quality meat portions
As the industry enters the third year of this downturn, farmers and agribusinesses are questioning if a recovery is on the two-year horizon. While cyclical behavior is normal, two economists suggest the structural evolution within crop protection, machinery, technology, livestock and other individual sectors is creating a different kind of staying power for those who survive the recovery.
The Evolution of the Cycle
When characterizing the current economic cycle in agriculture, historical patterns provide a necessary baseline, yet the present landscape is defined by unique pressures. Typical agricultural cycles consist of roughly six years of expansion followed by four years of decline. Currently, the market is navigating a “corrective period,” returning to long-run averages.
The drivers of growth are typically demand shocks — export surges, fuel demand or policy shifts such as the Renewable Fuel Standard. However, Wes Davis, ag economist at Meridian Ag Advisors, notes the current environment is an intersection of traditional contraction and sector-specific evolution.
“What I think we’re experiencing right now is that typical cycle behavior where we see growth in some business firms, and then some contraction and pullback to adjust to the cycle going back to more of the long-run average,” Davis explains. “I think we’re also seeing evolution of individual sectors within the market where there’s adjustments happening because of the industry itself.”
In other words, this isn’t just a cycle — it’s also a structural shift.
Change Fatigue and Modern Volatility
Farmers aren’t strangers to volatility, but global trade disruptions, policy shifts and rising competition, especially from Brazil, are layering uncertainty onto already volatile markets.
Farmers are grappling with “change fatigue,” a byproduct of the high velocity of information and extreme price swings that dwarf the relative stability of the early 2000s.
“When I go talk to any industry group right now, the phrase that I hear is ‘change fatigue’, and I feel that. Every couple minutes, something shifts,” says Trey Malone, Purdue University ag econ professor. “But to be clear, it’s not that the farm economy isn’t used to volatility, it’s just the uncertainty and the volatility now is, like, ‘hold my beer relative’ to the old volatility.”
Malone attributes this to layers of uncertainty created by global trade and policy. The rise of Brazilian production, coinciding with the disruption of U.S.-China trade relations, has created a permanent state of flux. This sentiment is reflected in the Purdue Ag Economy Barometer, which shares a higher correlation with the Small Business Index (.5) than with actual commodity prices. This suggests farmers view themselves primarily as small business owners facing broad economic pressures rather than just price-takers.
“We don’t see very strong correlations even with lagged soybean prices and corn prices,” Malone notes. “The world is more complicated than just looking at what happened in the market yesterday and gauging how farmers feel.”
Global Competitiveness and the Trade Reallocation
A primary concern for U.S. producers is their position as low-cost providers. While the U.S. maintains an infrastructure advantage that lowers the cost of getting products to export ports, Brazil continues to close the gap.
“It’s a fair question farmers ask a lot: Are we actually the ones who are the low-cost producers, and do we still have a place in the global market if Brazil continues to lower the cost of production and transport their grain to export terminals?” Davis asks.
However, Davis points out that global trade hasn’t shut off; it has reallocated. Only three global regions — North America, Latin America and parts of Southeastern Europe/Central Asia — are net exporters. The rest of the world remains net importers.
“While our trade has kind of shifted around ... that shift has really reallocated stuff in different places. Those calories and products end up going somewhere. It’s just a question of where,” he says.
The Shift to “Friend-Shoring” and Resilient Supply Chains
The industry is moving from “just-in-time” (hyper-lean) procurement to “just-in-case” (inventory-heavy) strategies, a lesson reinforced by the pandemic. This shift is accompanied by “friend-shoring,” where the U.S. prioritizes trade with geopolitical allies.
“We’ve gone from offshoring to onshoring to nearshoring to friendshoring,” Malone explains. “We’ve got a paper that’ll be coming out ... where we document friend-shoring in ag and food supply chains. Over the last 10 years, there’s been a shift where we mostly in the U.S. trade with other people who vote like us in the WTO. That’s kind of one way to measure friends.”
This resilience is also visible in crop protection. In 2019, 80% of active ingredients were sourced from China. Today, that is closer to 60%, with manufacturing shifting to India and domestic sites. Davis calls these “geopolitically resilient” supply chains.
The Rise of Generics and Decision Paralysis
The economic downturn is fundamentally changing the business model for input providers. Farmers are aggressively cutting costs, leading to a massive surge in generic usage.
“The latest survey I saw shows about 60% of farmers use generics today. That was about 30% to 40% just 5 years ago,” Davis says. This forces companies to pivot from differentiation to operational volume.
In the machinery sector, high costs and economic uncertainty have led to “decision paralysis.” Farmers are extending the life of their equipment, treating machinery replacement as the most controllable variable in managing annual ROI. Davis notes the U.S. ag equipment cycle is currently 15 to 20 percentage points lower than typical low points, driven by this hesitation. Furthermore, there is significant skepticism toward subscription-based technology models.
“Farmers don’t terribly love this idea, and I think the other interesting thought here is I’m not sure that retailers like selling them either,” Malone adds.
AI: The “Undergraduate Intern”
While artificial intelligence (AI) is a major talking point, its current role in agriculture is more supportive than transformative. Malone views AI as a “highly capable undergraduate intern” — useful for processing information but incapable of replacing the trust and risk management provided by human advisors.
“I don’t think you need to be replacing your agronomist. I think your mediocre agronomist just got OK,” Malone says, noting while LLMs can pass CCA exams, they cannot manage the risk of a wrong decision. “The risk management value proposition of an in-person Claude, or whoever, is probably going to win out because there’s still a risk.”
Currently, the adoption gap is wide: While 75% of agribusiness managers see potential in AI, only 4% have implemented it, according to a Purdue University survey in 2025.
Livestock and the GLP-1 Impact
The livestock sector is facing a unique demand shift driven by weight-loss medications (GLP-1s). This is leading to “premiumization.” As consumers eat smaller portions, they are opting for higher-quality cuts.
“The explosion in demand for protein is just shocking,” Malone says. “What GLP-1s do to that calorie count is they are all shifting toward premium cuts. You don’t care how much it costs because you’re only going to have seven bites of it. But you’re going to have a steak. That premiumization is going to really, really take off in the next 10 years.”
Conversely, the hype surrounding “fake meat” has largely faded, proving to be more of an investor-led phenomenon than a market-driven one.
Financial Stability: Not the 1980s
Despite the downturn, the financial health of the American farmer remains more stable than during the crisis of the 1980s. Currently, 10% to 12% of farmers are in a “tight” financial position, compared to 20% to 30% in the 80s.
“We do have a completely different, more professional ag workforce than we did back then,” Malone says. “The farm policy we have right now does not necessarily match what we need for the future, but all of these things make me think we’re in a much more stable position.”
Farmers have built-in “shock absorbers,” Davis adds, including off-farm income and working capital built up during the expansion years. However, in his research Davis has seen how alternative financing is becoming a major tool for the 50% of farmers who use it — either to manage stress or, for larger operations, to leverage relationships with retailers.
Strategic Reassessment: Winning at the Bottom
The experts agree the “bottom of the cycle” is the time for professionalization and upskilling. Surviving — and thriving — will require sharper management. It is an opportunity to reassess farm transitions and management disciplines, such as financial management, accounting and planning, which become critical in tight margins.
“Farmers are going to have to get smarter and get more creative with how they manage,” Malone says. “This is a good opportunity to take a step back and think about what the strategy needs to be moving forward.”
Davis emphasizes relationships are solidified during these periods: “Farmers are going to remember the folks who were around when they were in the bottom of the cycle, and who were there to support them. The best farmers will continue to get better ... I get excited about what we can look like as we come out of this cycle.”
So Is This Ag Cycle Different?
These experts say yes as every cycle presents its own unique reshaping of future opportunities.