US farmers have warned that tariffs pledged by presidential candidate Donald Trump could undermine an agricultural sector already battered by high interest rates and falling commodity prices.
Rural areas have been a consistent source of support for Trump and Republicans, with 56 per cent of rural voters telling a recent Rural Democracy Initiative poll that they would vote for the former president.
But farmers have been caught in the middle of trade wars started during Trump’s presidency. In response to tariffs he placed on Chinese imports in 2018 — most of which have been retained by the Biden administration — China placed a 25 per cent charge on US pork and soyabean exports.
While farmers were given $61bn worth of bailouts to offset the losses from tariffs between 2018 and 2020, farm debt and closures increased in crucial battleground states such as Wisconsin and Georgia, although the number of bankruptcies has gone down since then.
But Trump has pledged to impose a 60 per cent levy on goods imported from China if re-elected, and farmers fear the effect of them and retaliatory tariffs.
“We as the pork industry are concerned about additional tariffs — even if they’re not put on our products we feel the effects,” said Lori Stevermer, a pork producer from Easton, Minnesota.
“Twenty-five per cent of our pork is exported, so [the tariffs] add about $64 to the value of a pig,” she said. “If tariffs are put on incoming products, often the pork industry feels the repercussions.”
The threat of new tariffs comes as weak crop prices and dwindling livestock combines with high borrowing and operating costs for farmers. The United States Department of Agriculture forecasts that net farm income is set to fall to $116.1bn in 2024, a record year-on-year decline of 25.5 per cent.
Some 23 per cent of respondents in a Purdue University-CME Group Agricultural Economy Barometer survey cited high interest rates as the biggest concern for their farming operations, while 33 per cent said they were most worried about rising input costs and 25 per cent were worried about lower crop and livestock prices.
“Prices are much lower than we want them to be,” said Wisconsin state senator Brad Pfaff. “It’s very challenging for our family farmers to make a living.”
Arable farmers who grow crops such as corn and soyabeans have been battered by low prices due to supply rebounding last year after Ukraine resumed exports following a pause due to the Russian invasion. A strong US dollar has also damped global demand.
Corn futures on the Chicago Mercantile Exchange fell to $3.95 per bushel in mid-August, the lowest price since November 2020, while wheat and soyabean prices have fallen 9 per cent and 24 per cent respectively year to date.
High input costs and elevated interest rates are also damaging cattle ranchers’ ability to replenish their herds.
Cattle inventories were already historically low, due to a combination of supply chain issues and weather events. The USDA’s six-monthly report in January, the most recent available, showed that the numbers of cows available for beef, milk and breeding had dropped to 87.2mn, the lowest level since 1951.
Meanwhile, the number of cattle on feed — or being prepared for slaughter — is rising, while the high cost of borrowing is preventing farmers from obtaining capital to replenish their herds. Given it takes 18 to 24 months to raise a cattle for slaughter, there is likely to be a supply squeeze until lower rates, which are expected later in the year, kick in.
“When we start holding female cattle back to start growth again, we’re going to be taking more out of the market supply chain and grocery store shelves, which will pressure beef prices upward higher yet,” said Bernt Nelson, an economist at the American Farm Bureau Federation.
Walter Schweitzer, a third-generation cattle rancher near Geyser, Montana and president of the state’s farmer’s union, said he was forced to sell a third of his cow herd in 2022 due to drought conditions.
“The female herd is as low as it’s been in a long time,” he said. “High interest rates are a huge factor in why we haven’t really started rebuilding.”
While ranchers can get good prices for their meat from packers, these have still not kept pace with input costs. According to research from the Kansas City Federal Reserve “the range of prices has stayed below the total cost of production [so far in 2024]”.
Industry experts warn that these financial pressures could ultimately be passed on to consumers.
“Right now there are a lot of different obstacles in the way of our farmers remaining profitable,” said Nelson.
Meanwhile, political deadlock is hanging over the sector.
Farmers are frustrated that Congress has since 2018 been unable to pass a new farm bill, which provides crop insurance for food producers. Industry advocates say that the level of compensation has not been updated to account for the high inflation of recent years.
“I can’t say exactly what individual family farms will do at the ballot box, but I do know that kitchen table economics matter. I would strongly advise our congressional representatives to remember that,” said Wisconsin state senator Pfaff.