With president-elect Donald Trump set to re-enter national office on Monday, Scott Irwin offers row crop growers a word of caution and what he describes as a bit of contrarian advice.
“I know farmers have had some optimism about recent grain prices, but I think it’s a good time to dip toes in the water and consider getting some downside price protection for the 2025 crop,” Irwin told Farm Journal during the Illinois Soybean Association Field Advisor Forum earlier this week.
“It’s a little hard to do that when you’re pricing at what would be a full cost loss, but I think that potential immediate downside risks of trade problems we could be heading into could hit both corn and soybean prices moving forward really hard,” he adds.
In analyzing corn and soybean prices, Irwin is predicting corn at $4 per bushel and soybeans at $10 per bushel for 2025. Furthermore, while net farm income hit a peak at over $180 billion in 2022, his latest projections for 2024 show a significant drop to around $40 billion.
The University of Illinois agricultural economist says that procuring some downside price protection is his No. 1 recommendation to farmers for the short-term.
Will Trump Impose Tariffs?
Weighing on Irwin’s mind is what Trump will do regarding trade, namely whether he will impose tariffs on any or all of the United States’ three largest trading partners - Canada, Mexico and China.
Trump has said he will impose a 25% tariff on imports from Canada and Mexico until they clamp down on drugs, particularly fentanyl, and migrants crossing the border. He has separately announced the U.S. will impose tariffs from 10% to 60% on goods from China.
“The one thing I learned thinking about economic implications during Trump 1.0 is that when he makes a pronouncement on economic policy, you better take him seriously,” Irwin says.
A Look In The Rearview Mirror
U.S. agriculture has some recent history of what could happen if tariffs are imposed and trade partners decide to implement tit-for-tat retaliations.
Irwin specifically referenced China’s decisions during Trump’s first administration as an example. When the U.S. imposed tariffs on China in 2017-18, the country retaliated on U.S. soybeans and took its business to South America, namely Brazil.
The financial fallout for U.S. agriculture was significant. USDA Economic Research Service data show the United States exported $12.2 billion in soybeans to China in 2017. However, in 2018, U.S. exports to China fell to $3.1 billion, a 75% decrease.
“A lot of people downplayed that experience because, honestly, it didn’t last that long,” Irwin recalls. “The worst of it was only about six to eight months.”
He attributes the short duration partly to the crisis China went through at the time with swine flu, which decimated pig herds and required the company to undertake extensive herd rebuilding. In the process, China was unable to source enough soybeans from Brazil to meet demand.
“Unless China gets a new swine flu disease that’s not going to bail us out this time,” Irwin says.
China Is Already Changing Course
In response to tariff concerns, Chinese oilseed importers have already shifted gears to purchase competitively priced Brazilian soybeans.
The move is hitting U.S. suppliers towards the end of their peak marketing season in January, according to a Reuters article published on Friday (Chinese buyers switch to cheaper Brazilian soybeans ).
The Reuters article says the move is likely to leave the U.S., the No. 2 soybean exporter after Brazil, with 10.34 million metric tons of beans by the end of the 2024/25 marketing year in August, the highest in five years, according to U.S. Department of Agriculture estimates.
‘Something Always Happens’
Regardless of his concerns about trade, Irwin says it’s important to keep some perspective on what he describes as a normal price cycle for agricultural commodities currently.
“Don’t get too pessimistic ever about prices or too optimistic, that’s my attitude,” he says. “Something always happens eventually (to send prices up or down).
“This summer, we could get a big drought here in the U.S., and all of a sudden, grain prices are at very profitable levels,” Irwin says. “Or it might take us several years to grind our way out of the trade problems that I think we could be facing, and that’ll be a lot tougher environment. But even if that happens, it won’t last forever, and that’s, I think, a very important mindset to have.”
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