I subscribe to Greg Ibendahl’s Agricultural Economics Substack. Greg is with the Department of Agricultural Economics at Kansas State University and regularly produces practical, data-driven analyses of broadacre farming from an American perspective. His latest article, reproduced below (with Greg’s permission) and originally published on 24 June 2026, shows we are not alone facing rising input which can turn what appeared to be a profitable wheat crop into a financial disaster. It also serves as a timely reminder that while American farmers face many of the same seasonal and economic pressures as Australian growers, they also operate with a level of government support that Australian farmers can only look on with envy or horror depending on your perspective.
The Kansas wheat squeeze
– Dr Greg Ibendahl
Our budget for winter wheat in North Central Kansas was built in November 2025. It assumed a mid-range yield of 62 bushels per acre (4.2t/ha), a planning wheat price of US$5.36 per bushel (approximately A$285/t) and a diesel price of US$3.22 per gallon (approximately A$1.23/L). Under those assumptions, the total cost of growing wheat came out at US$336 per acre (approximately A$1,310/ha), or US$5.42 per bushel (approximately A$289/t).
Kansas farmers are currently receiving around US$5.70 per bushel (approximately A$304/t) from local grain elevators, slightly better than the budget assumed. At the original input prices, that would have delivered a modest profit of US$17 per acre (about A$66/ha), or US$0.28 per bushel (about A$15/t) above total costs. Not a windfall, but real money.
Here’s the problem. Input prices didn’t cooperate.
Since November, diesel has risen from US$3.22 to US$5.01 per gallon (about A$1.23/L to A$1.91/L)—a 56 per cent increase in roughly seven months. Producing a wheat crop requires around 3.55 gallons of diesel per acre (approximately 33L/ha) across planting, fertilising, spraying, harvesting and hauling. That single input swing has added US$6.36 per acre (around A$25/ha) to production costs.
Urea—the primary nitrogen fertiliser used in wheat production—has increased from US$600 to US$831 per short ton (approximately A$990/t to A$1,370/t), a rise of 38 per cent. A typical North Central Kansas wheat crop yielding 62 bushels per acre (4.2t/ha) requires about 205lb of urea per acre (approximately 230kg/ha). That increase alone has added US$23.68 per acre (about A$92/ha) compared with the November budget.
MAP (monoammonium phosphate) has been one bright spot, increasing only 1.4 per cent from US$940 to US$953 per short ton (approximately A$1,550/t to A$1,570/t).
Add it all together, along with the additional interest cost of carrying higher input prices, and total production costs have risen from US$336 to US$368 per acre (approximately A$1,390/ha to A$1,520/ha)—an increase of US$31.39 per acre (about A$129/ha).
On a production basis, costs have increased from US$5.42 per bushel (approximately A$289/t) in the original budget to US$5.94 per bushel (approximately A$317/t) today.
At the current local elevator receival price of US$5.70 per bushel (approximately A$304/t), that input cost surge has erased the modest profit and then some. A grower achieving the budgeted yield of 62 bushels per acre (4.2t/ha) is now losing US$0.24 per bushel (approximately A$62/ha). To break even at current input costs, wheat needs to trade at US$5.94 per bushel (approximately A$317/t, note the US inland price is discounted compared to the Australian price due to distance from ports). The higher wheat price helped, but the increase in input costs more than offset the gain.
That’s the bad news. It is not the worst news.
Then the drought hit.
The 2026 Kansas wheat crop is shaping up to be one of the worst in recent memory. Drought conditions across the state have cut expected yields to around 35 bushels per acre (2.35t/ha)—roughly half of what this budget assumed.
That changes everything.
When you hold costs largely fixed and cut the yield nearly in half, the economics deteriorate rapidly.
At 35 bushels per acre (2.35t/ha) and a local elevator price of US$5.70 per bushel (approximately A$304/t), gross revenue falls to US$199.50 per acre (approximately A$822/ha). Most production costs—fertiliser applied in the fall, seed already in the ground, herbicides and fungicides already sprayed, and cash rent already committed—do not fall simply because the crop underperforms. The only costs that decline with yield are harvesting and freight, reducing costs by only US$3.30 per acre (approximately A$14/ha). Everything else had already been spent before the drought revealed itself.
As a result, variable costs remain around US$245 per acre (approximately A$1,010/ha) while revenue falls to just US$199.50 per acre (approximately A$822/ha). That leaves the crop US$45 per acre (approximately A$185/ha) below variable cost—the point at which a crop is no longer covering even its direct operating expenses.
Compare the normal North Central Kansas yield of 62 bushels per acre (4.2t/ha) with this year’s drought-affected yield of 35 bushels per acre (2.35t/ha). Under normal conditions, gross income would have been US$353 per acre (approximately A$1,455/ha) and the grower would have been making a modest profit of US$17 per acre (approximately A$66/ha). Under today’s higher input costs, however, that same crop would return a loss of US$15 per acre (approximately A$62/ha). Under drought conditions, revenue collapses to US$200 per acre (approximately A$822/ha) while total costs remain around US$364 per acre (approximately A$1,500/ha), producing losses of US$165 per acre (approximately A$680/ha).
The cost of production blows out from US$5.94 per bushel (approximately A$317/t) to US$10.42 per bushel (approximately A$556/t), while wheat is selling for only US$5.70 per bushel (approximately A$304/t). In simple terms, Kansas wheat growers are receiving just 55 cents in revenue for every dollar it costs them to grow this year’s crop.
Read that last figure again.
To cover every cost of production on a drought-affected crop yielding 35 bushels per acre (2.35t/ha), wheat would need to sell for US$10.42 per bushel (approximately A$556/t). Instead, Kansas growers are receiving US$5.70 per bushel (approximately A$304/t). Farmers are recovering only 55 cents in revenue for every dollar it costs them to produce the crop.
Crop insurance is the lifeline preventing this from becoming a complete financial catastrophe for individual farm businesses. Kansas growers participate in a federally subsidised crop insurance program costing US$9.34 per acre (approximately A$38/ha) in premiums. At the drought-reduced yields being experienced across much of the state, the vast majority of wheat growers will qualify for insurance payouts.
How much they receive depends on their Actual Production History (APH), the level of cover they selected and whether they purchased the harvest price option. A well-insured farm could expect indemnity payments worth US$60 to US$90 per acre (approximately A$250 to A$370/ha). That does not fully offset losses of US$165 per acre (approximately A$680/ha), but it preserves cash flow, protects working capital and allows farmers to plant another crop next season.
Crop insurance, in other words, is doing exactly what it was designed to do. It is socialising the risk of a production disaster that no individual farmer could have prevented.
Dry Farmer’s view
[aka Trevor Whittington]
Now I would have more sympathy for our American cousin farmers facing the same high input costs and drought that we are, except for one important difference. Unlike Australian growers, they have a taxpayer-funded safety net.
At the drought-reduced yields being experienced across much of Kansas, crop insurance indemnity payments could return between A$250 and A$370/ha. Across a 2,000-hectare wheat program, that equates to A$500,000 to A$740,000 in government-supported insurance payments.
A European grain farmer would likely fare even better. In addition to subsidised crop insurance in many member states, most receive direct payments under the European Union’s Common Agricultural Policy (CAP), typically worth A$150 to A$400/ha. For a 2,000-hectare grain operation, that represents a further A$300,000 to A$800,000 in annual income support before a single tonne of grain is harvested.
Perhaps that is the real lesson from Kansas. The drought may be an act of nature, but the end financial outcome is largely an act of government policy. After decades of free trade negotiations, the world has not abolished agricultural subsidies—it has simply become more creative about how they are delivered. The Americans call it crop insurance. The Europeans call it direct payments. Either way, the cheque still arrives, helping keep grain production flowing for the US and EU and as a result the world awash with wheat which hurts Australian grain farmers.
