When the Music Stopped: The 1980s Farm Crisis and Today’s Ag Environment
I have a love–hate relationship with agriculture.
I work with some of the best entrepreneurs in Canada. But I’ve also never been part of an industry where a meaningful number of people want to be right so badly, they’d rather watch the place burn than admit the story might be more nuanced.
That’s what sent me down the 1980s farm crisis rabbit hole last week.
After being asked (again) whether we’re approaching “judgment day,” I decided to look at facts versus fear. A lot of advisors are pushing a narrative that could be right or could be wrong. I lean toward the latter, but I wanted the backup to say it out loud.
And to be clear: I could still be wrong.
1) The Debt Crisis (and what people get wrong about it)
Yes, the 1980s were debt-related. Just not in the way most people tell the story.
Interest rates were a different planet. In the early 1980s, rates were 12%+ (based on Bank of Canada historical data). Today, they’re nowhere near that. It’s hard to argue that “rates alone” are about to be the demise of land values in the same way.
More importantly, farms today have tools and awareness that simply weren’t common then. Most progressive operations we work with:
- track renewals years in advance
- lock in longer terms (10–15 years) where it makes sense
- and in some cases use interest-rate swaps to reduce exposure
In 1980, that wasn’t the norm. A 1% rate move hurt badly.
Total debt levels are also higher today (even inflation-adjusted). That matters. But it matters in context.
When you look at debt-to-equity, the industry is roughly in the same ballpark as 1980 – around 20%. This means the underlying asset base is still strong but not all farms are safe. It also means a major land correction would not wipe out the entire industry. Highly leveraged farms would feel it. Disciplined balance sheets would survive it and some would be positioned to buy.
Lastly, consider debt service. Today, many farms are running debt service coverage ratios around 1.4+, versus closer to 1.2 in the 1980s. That suggests that even with compressed margins, cash earnings relative to payments and living costs are generally stronger than people think.
Farms operate on margin, not price, yield, or costs in isolation. Prices may feel “low” compared to the 1980s when inflation-adjusted but yields are also dramatically higher. The math has changed.
2) The Cash Flow Crisis (or the storyline people want to believe)
The speculators would have you believe we’re in a cash flow crunch.
I’d believe it too, if we didn’t see hundreds (and sometimes thousands) of balance sheets a year that tell a more complicated story. And if you look at the 1980s data, working capital in agriculture is roughly double what it was then.
Are there farms with tight working capital? Absolutely. Especially where consolidation and “iron purchases” got ahead of the cash flow. But again, when you anchor on debt-to-equity and debt service, that’s often a fixable problem with the right banking strategy and operational discipline.
What I see more often than a true systemic cash-flow collapse is this – a farm that needs to stop managing by headline and start managing by numbers.
One nuance worth saying out loud is that consolidation does create pressure on short-term financing. If you have $200/acre of working capital and you double your acres, you’re now effectively at $100/acre. That’s just math. The fix is strategy. Creating strong banking relationships, disciplined capital planning, and control of operating leverage.
3) The Land Crisis (and the lie we keep telling ourselves)
Here’s a not-so-secret, secret: Land has never “pencilled.”
When I started farming, a quarter was $60K and it didn’t pencil. Today it might be $600K and it still doesn’t pencil on paper.
But if you compare net worth today to 20–30 years ago, most producers are dramatically wealthier. That happened because of the land base.
So when advisors and real estate agents start telling you to sell the one asset that has made you rich… common sense says to ask why.
There’s another reality today that you need to consider. Farms are often over-equipped and oddly, that can be a benefit when expanding.
If your existing equipment and labour can handle more acres, spreading fixed costs over more dirt can lower cost of production per acre, even if rent or land prices feel high. The trick is simple and brutal – don’t expand and then buy more iron.
Previous generations used equipment more efficiently than we tend to today. If you’re willing to sweat the system, land can still “pencil” operationally even if it never looks pretty on the brochure math.
4) The disclaimer that actually keeps me up at night
Here’s the risk I don’t hear enough “experts” talking about:
How many baby boomers are built to sell?
Land values, future margins, and the next decade of agriculture will be heavily influenced by retiring farmers’ decisions.
The math says roughly 65% of agricultural assets are held by people approaching 65. Life expectancy data from insurance tables often lands around the low-to-mid 70s. Over the next ~8 years, a significant portion of assets will transfer, be sold, or be liquidated.
How much gets transitioned versus liquidated?
How much stays in the estate versus sold to settle it?
How much is managed for generational wealth versus cashed out?
For an industry that prides itself on caring about the next generation, we’re about to find out how true that is.
If we pass the test, agriculture keeps its pace, land remains a strong asset, and the next generation tells stories about the legacy that was built.
If we fail, supply outruns demand, access to capital tightens, and land values soften because only a small share of the industry is under 40.
Tell me how that plays out and you win the prize.
Final thought
I’m not writing this to dunk on people warning of doom. Some warnings are warranted. I’m writing it to remind you that disciplined management beats narrative.
If your balance sheet is in the right place, your risk mitigation is in the right place, and your transition plan is in the right place, you don’t need certainty about whether I’m right.
If land craters, you’ll have opportunity.
If land holds, you’ll have opportunity.
If you’re unprepared, either scenario hurts.
In the end, the only thing you can be certain of one thing – land will go up, or land will go down.
Take that to the bank.
