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Southern Indiana farmer Scott Wallis farms with his son and son-in-law, and sometimes his 40 years of experience makes him feel like a permabear, always popping the young gun's bubbles.

"I'm the old guy, so it's kind of my job," the 61-year-old farmer says with a chuckle.

But, in other ways, being the old guy is reassuring. Wallis farmed through the grind-it-out, tough-it-out 1980s and '90s.

"I don't remember a time in the '80s and '90s when we were just flush," he says. "You just paid your bills." If something was torn up, he adds, "maybe you replaced it, or more likely you just kept fixing it until you couldn't fix it anymore. You make a living and then just move on to the next year."

Younger generations haven't been through anything like it before, and they're facing additional challenges with the current down cycle, Wallis explains.

"They've got something that's worse than the '80s, and that's the price of machinery compared to farm size or gross income," he says.

When Wallis graduated from high school, a combine with heads cost $50,000 to $60,000. The farm's goal was to gross $400,000. While the payments would be spread out over several years, the equipment cost about 12.5% of the farm's targeted earnings.

Today, a combine with corn and soybean heads costs $1 million. If the farm's goal is to gross $4 million, the equipment is now 25% of the farm's earnings.

"That problem is magnified in everything we use equipment-wise," he says. "That's the economic woe that I think is worse than the 1980s. The interest rate ain't near as bad."

Wallis remembers when his father first used an operating note in 1982. It had an 18% interest rate. "When things got down to 10%, we thought it was free," he says.

Then, Wallis experienced almost free money when interest rates dropped to historic lows and was grateful for the opportunity to buy land when rates were low. Like most farmers, he wishes he'd bought more land.

"Whether you have debt on it or not -- as long as it cash flows -- it's worth more when you own it," he says. Over time, the farmer benefits from the land's appreciating value as well as from lower or more flexible expenses compared to paying market-rate cash rent.

University of Illinois crop budgets for 2024 show cash rent will likely be a dividing line, if not between the profitable, between those who suffer the steepest losses. For a highly productive central-Illinois corn farm, gross revenue (calculated using an average price of $4.50) minus total nonland costs is $210 per acre. If the farmer pays $363 per acre cash rent, his total return is negative $153.

"The biggest challenge I see in the Midwest is the lack of equity among farmers who don't own very much land," Wallis says. "They don't have anything to fall back on."

Historically, farmers lean into land equity to get through difficult economic times. As farmers stop spending, the buyer pool for farmland will shrink, although Wallis believes increasing nonagricultural investor interest will keep prices from retracting as sharply as they did in the 1980s.

While that's good news for landowners, it's emblematic of the challenge facing the next generation of farmers: It's significantly more expensive to buy in.

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