Agricultural economists are growing even more pessimistic as the latest Ag Economists’ Monthly Monitor shows the majority are concerned President Donald Trump’s tough stance on trade could push agriculture deeper into a recession while also giving Brazil more of a competitive edge. As one economist stated, the stakes are high, and the key is whether Trump’s policies push ag deeper into a recession, and if U.S. agriculture can survive without China.
The Ag Economists’ Monthly Monitor is a survey of nearly 70 agriculture economists nationwide. This month, 72% of those surveyed say the row crop side of agriculture is in a recession, up from 62% last month. Eighty-two percent of economists also think this could force more consolidation in agriculture.
Despite Trump’s 90-day pause on tariffs for most countries except China, economists stress agriculture is in peak uncertainty.
Of the 72% who think agriculture is in a recession, their reasons are:
- Compressed margins and concern about operating debt carried over from last year.
- Prices for most crops have declined more than production expenses since 2022.
- Negative returns for at least the third consecutive year across nearly all row crops.
Yet, the 28% who believe the crops side of agriculture isn’t in a recession say:
- “Profit opportunities are there, but slim.”
- “Economic performance and growth of U.S. ag is slowing and/or stable but not declining. It’s too early for the impacts of tariffs to change ag business decision-making.”
- “Given the volatility in the crop session, a recession requires at least two bad return years, where returns include both private market and government payments. We do not know about 2025 yet, nor do we know the extent of government payments for 2024 crops yet and thus what will be the total return for 2024.”
Economic Drivers
In the survey, 42% of economists said the current state of the ag economy is “somewhat worse” than a month ago, while 26% said it’s unchanged. But when you compare outlooks to a year ago, 58% of economists responded the ag economy is somewhat worse.
Economists were asked to list the two most important factors driving agriculture’s economic health today, as well as in 12 months. Tariffs and trade war topped the list.
“Weather will always be one of the primary factors, but we can add President Trump’s efforts to restructure global trade to that list this year. We’re in worse shape if he fails and better shape if he succeeds. Big stakes,” one economist said.
In addition to tariffs and the trade war, economists also said:
- Inflation
- Interest rates
- Political uncertainty
- Consumer demand
- Status of trade issues and the supply-side (crop size) of the balance sheets.
- The inability of farmers to manage price volatility due to uncertainty around trade
High Stakes with Trade
Agriculture is an export dependent business. According to the Trump administration, when it comes to tariffs and the impact on the overall economy, long-term gain will be worth the short-term pain. However, when it comes to agriculture, the economists surveyed don’t agree.
When ag economists were asked if they think Trump’s strategy of using tariffs as a negotiating tool will benefit U.S. agriculture in the long run:
- 76% responded no
- 24% responded yes
Since the last trade war, Brazil has gained ground and displaced the U.S. as the top corn exporter in 2023. Economists believe it won’t be the U.S. benefiting from this trade turbulence, but instead these competitors:
- Brazil (76% of responses)
- China (12% of responses)
- India (6% of responses)
- Ukraine (6% of responses)
Will Farmers Be Compensated for Short-Term Pain?
As Web reported, Agriculture Secretary Brooke Rollins has stated since winter that if farmers suffer financial pain from the trade war, the Trump administration will look at compensating farmers at some point.
Of the economists surveyed, 89% think USDA will compensate farmers with financial payments, similar to what the previous Trump administration did with the Market Facilitation Program Payments (MFP). However, 80% of economists say it’s too early for USDA to be considering compensating farmers for financial fallout.
Bottom line:
The risks are high. Unless the U.S. invests in domestic manufacturing over an extended period, the loss from exports could be a big hit to ag commodities. But if the Trump administration can gain more trade access to key countries, the rewards could be even bigger.
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