Digging Deeper...

/

Agricultural export trade is an important revenue stream for many farmers and ranchers in the U.S. It directly influences their operational decisions when planning for the coming year. With higher tariffs proposed as the Trump Administration moves into the White House, farmers and ranchers are wondering how new policies will affect their operations and business ledgers.
By Dennis McLaughlin, McLaughlin Writers LLC. Sources: AgriPulse Communications, January 8, 2025; Ag America, December 4, 2024; AFBF/The Conference Board, Oct 4 2024; Steve Cubbage, Longitude 94 LLC/AgWeb, January 8, 2025; USDA Economic Research Service, November 26, 2024.

USDA Revises 2025 Ag Exports Upward…… A Bit 

For the moment, U.S. agricultural exports appear to be a positive in the overall outlook for the nation’s international trade. In its last agricultural export forecast of 2024 (November 26, 2024), USDA’s Economic Research Service said the overall value of U.S. agricultural exports in FY 2025 will reach $170 billion. That’s up $500 million from the August outlook. This projection was supported by increases in livestock and dairy exports. Beef exports were revised upward by $400 million, bringing the total to $8.8 billion, according to the ERS’s November report. The dairy outlook was raised $300 million to $8.4 billion. “This new higher forecast is based on increased U.S. price competitiveness for a number of products,” ERS said.

The latest forecast overall for livestock, poultry and dairy exports is expected to increase by $700 million to $39.3 billion. Grain and feed exports are forecast at $36.5 billion, up $200 million from the August forecast, as higher exports of corn and sorghum more than offset moderately lower wheat and feed and fodder exports.

Exports to Mexico are forecast to grow to $29.9 billion, a $700 million increase. Exports to Canada are projected to hit a record high of $29.2 billion based on stronger-than-expected demand for beef, fruits, and vegetables. 

Another cause for exporter optimism, as well as for importers, is the apparent labor settlement between the Longshoremen’s Association and the U.S. Maritime Alliance that represents container carriers and port operating employers. Such a massive strike at East and Gulf Coast ports might have cost the U.S. export/import industry $1.4 billion a week, said the American Farm Bureau Federation, citing statistics from The Conference Board (October 4, 2024). 

But there is reason to temper expectations about the near future. USDA projects ag imports will increase to $215.5 billion in 2025, driven by strong overseas demand for horticultural and tropical products such as fruits, nuts, and sugar. Since 2020, agricultural trade imports have increased as much as 50%, reported Ag America (December 4, 2024), “while U.S. agricultural exports have increased by a lesser 22%.”

This widening trade gap can be attributed to a mixture of factors, noted Ag America, Including these:

  • A decline in U.S. agricultural exports to China, historically a top agricultural export market.

  • An increase in U.S. consumer demand for imported agricultural products.

  • Drought and severe weather conditions in the U.S. lowering yields and increasing import demand. 

“This growing agricultural trade deficit,” Ag America said, “also underscores the importance of maintaining diversified markets and minimizing trade barriers to sustain export momentum.”

Ag Is Wary

The Trump administration has signaled it will impose tariffs on products from China, Mexico and Canada. Agriculture economists and commodity groups worry that import tariffs on a wide range of farm products could backfire on U.S. agriculture. A week after the presidential election, 42% of farmers surveyed by the Ag Economy Barometer said they think it is either likely or very likely that U.S. agriculture is at risk of a trade war that will cause significant decrease in U.S. agricultural exports. Purdue University and financial services company CME Group survey 400 agricultural producers across the U.S. each month to track farmer sentiment. President Trump’s selection of Howard Lutnick as Commerce Secretary suggests that stiff tariffs will be a primary trade strategy. With the selections of Jamieson Greer as U.S. Trade Representative and Kevin Hassett as head of the National Economic Council, Trump will enjoy solid support for his trade policies.

Raising tariffs on other countries, though, usually leads to retaliation. Trade partners facing new tariffs from the U.S.will impose their own import taxes on U.S. products, noted Chad Hart, Ph.D., an agricultural economist at Iowa State University. “And agricultural exports are often targets in those trade wars,” he said. Dr. Hart emphasized that until there’s clarity about the scope and scale of tariffs, trying to predict the exact impact they could have on the U.S. puts “the cart before the horse.” But increased tariffs imposed on China in 2018 and 2019 have led to billions in losses for U.S. agricultural products—even after $23 billion in federal aid to farmers to cover short-run losses from trade disruptions. Zach Helder, the Agricultural Business Council’s Director of Member Services, added “To protect their interests and deter further escalation, defending countries in trade wars need to maximize the political pain of new tariffs. Penalizing U.S. agriculture is the simplest and most visible response, especially as the availability of alternate grain supplies in South America provides a shield against domestic price increases in the retaliating country.”

Glynn Tonsor, Ph.D, agricultural economist at Kansas State University, focuses on the livestock and meat industry. Products go to countries where they’re most valuable in an open trade environment, he said. In an interview with Harvest Public Media (December 17, 2024), Dr. Tonsor said livestock producers at the start of the supply chain tend to be the most affected by sudden market shifts – such as tariffs. Farmers reliant on imported machinery, fertilizers and other inputs may face higher costs that cut into already tight margins, reported Ag America.

A Different Perspective

Steve Cubbage, founder of Nevada, Missouri-based Longitude 94 LLC and a thought leader in precision agriculture and food production, recently wrote in an article for AgWeb (January 8, 2025) that “the most overused word in the English language since November has to be the word tariff as speculation runs rampant on how much a Trump 2.0 presidency will use this controversial trade negotiation tool. Tariffs can disrupt almost any industry,” he said, “but U.S. agriculture has already ‘seen this movie.’” 

Instead, Cubbage warns that U.S. agriculture, as well as the overall American economy, should be more concerned about the influence China and Russia have over trading allies like Brazil, India and South Africa. China and Russia forged a compact with these nations known as BRICS in 2009. The trading bloc is the world’s largest by population and accounts for about 37% of the world’s grain. In 2023, Brazil was China’s largest source of agricultural imports, and that accounted for more than 50% of Brazil’s total trade with China. “No longer are U.S. farmers China’s primary source of imported soybeans or corn,” says Cubbage.

Solidly Embedded

China has been acquiring Brazilian railroads and expanding port facilities. Between 2007 and 2022, China invested $71.6 billion in 235 Brazilian infrastructure projects. “But China’s investment and buying spree has been more impressive within the continent of Africa,” notes Cubbage. China’s Belt and Road Initiative is active in 53 of Africa’s 54 nations and is also involved in Asia and Europe. “The projects intend to provide improved shipping corridors for precious raw materials and commodities, and as of 2023, the two-way investment between China and its BRI partners had reached $380 billion.”

Cubbage contends that if U.S. agricultural exports to China continue to decline, tariffs won’t be responsible. “It will be because China holds a majority of railroads, utilities and low-cost properties on the world’s Monopoly board.” Why buy U.S. soybeans, he asks, when the Chinese can ship them from Brazil on their own railroad to their own port in their own container ship? “If you already own everything but Boardwalk and Park Place,” he argues, “then you don’t need the economies of the West to be involved as you plot your future livelihood.”