On March 18th, the U.S. Department of Agriculture announced the procedure under which it would allocate the $10 billion in economic aid to farmers that was enacted into law in December 2024 as part of the second FY2025 Continuing Resolution (CR). This legislation was known as the American Relief Act of 2025. Financial assistance under this program will be available only to program crop producers, and will be paid on a per acre basis on a farmer’s planted and prevented planted acres for the 2024 crop year. Payment rates range between $11.36 per acre for mustard (a minor oilseed) up to $84.74 an acre for upland and ELS cotton. This funding was approved under some of the last legislation enacted under President Biden, although it was also supported by then-President elect Trump.
USDA has been able to automate the sign-up procedure for the Emergency Commodity Assistance Program (ECAP) to a certain extent, creating prefilled applications for the program that will be sent to eligible producers who have already reported their 2024 crop acreage to the Farm Service Agency. All eligible producers must complete their acreage reporting and submit their ECAP applications for funding by August 15, 2025. USDA will initially make pro rata payments at 75 percent of the statutory payment rates in order to ensure that all eligible producers receive at least some payment, then would make a second top-off payment if funds remain at that point.
Congress made the decision to provide this funding only for program crop producers, even though they account for only about one quarter of total U.S. farm receipts in typical years. Producers of these crops got hit particularly hard in the 2024 crop year, with cotton, corn, soybeans, and wheat receipts falling by 30 percent, 22.5 percent, 14.5 percent, and 9 percent respectively as compared to the 2023 crop year. Overall, net farm income fell by about 4 percent between 2023 and 2024, with the specialty crop and livestock sectors faring somewhat better than the row crop sector.
How is the U.S. farm economy expected to fare in the 2025 crop year? February 2025 projections from USDA’s Economic Research Service indicated a robust recovery for this year, with net farm income forecast to increase by 29 percent over the 2024 estimate, up to $181 billion. A big chunk of that increase is due to expected higher government payments, not just the $10 billion in economic assistance described above but from the additional $21 billion in supplemental agricultural disaster assistance provided in the same legislation. USDA has not yet announced when it will begin accepting applications for this second program passed late last year.
However, this set of projections is based on a set of assumptions about external factors that often influence agricultural markets which already appear to be overly optimistic. Firstly, it assumes that normal weather will prevail this year and thus generate an average or better crop for U.S. farmers. Based on the weekly U.S. Drought Monitor published on March 18, large regions of Midwest states which typically account for the majority of U.S. corn and soybean production each year are facing a moderate to severe drought, with only 3-4 weeks remaining before the beginning of planting season for those states. The most severely affected states are Nebraska, Iowa, Minnesota, and South Dakota, though every Midwest state currently has inadequate soil moisture in at least a portion of their cropland.
Last week’s (issued on March 20) 90-day outlook for weather by the National Oceanic and Atmospheric Administration (NOAA) indicated that most of the western U.S. should expect lower than average precipitation through June and that the Great Lakes states (Michigan, Indiana, Ohio, eastern Illinois, and Tennessee) should expect higher than normal precipitation, while the rest of the country has equal chances of above or below normal precipitation. Over the same period, most of the country is projected to have above normal temperatures, especially in Texas, New Mexico, and Arizona. The exceptions are the northern Midwest, northern Great Plains, and the Pacific Northwest, which are expected to have normal temperatures, encompassing the area from the states of Wisconsin and Iowa on the eastern edge and Oregon and Washington on the western edge.
Obviously, a potentially trade war is another factor that could affect the U.S. agricultural sector in 2025 and beyond. Even before the ‘reciprocal tariffs’ that President Trump has pledged to impose on a range of U.S. trading partners kick in on April 2nd, USDA projected in February 2025 that the U.S. agricultural export trade deficit would increase to $49 billion for 2025, a nearly 60 percent increase above the 2024 trade deficit. The government of China has already retaliated against key U.S. agricultural exports for the tariffs imposed earlier by the Trump administration, targeting soybeans, corn, and beef on March 10th. This step is similar to what the Chinese government did in response to Trump’s tariffs during his first term in office, which caused U.S. agricultural exports into that market to drop significantly, triggering large payments from USDA to farmers to compensate them for lost markets.
In a post on Truth Social in March, President Trump said that farmers should prepare to grow crops to sell into the domestic market. However, it is not feasible for farmers to change the composition of the crops they grow quickly, since their on-farm equipment and storage facilities are designed to facilitate growing and marketing a certain set of crops, and making a radical shift in the crops grown would incur huge expenses. In addition, the local markets and grain elevators that they sell into are geared for receiving the standard set of crops grown in the region, and they could not shift their operations readily either.
If the President follows through on his tariff threats, U.S. farmers could be left holding a lot of crops without the same overseas markets they are accustomed to selling into.
