What Do Farmers Stand to Lose in a Trade War?

We’ve heard a lot about trade this year. The U.S. government is negotiating with multiple countries to reach trade agreements. New tariffs and threats of new tariffs have sparked concerns of reciprocation and loss of markets for U.S. agricultural commodities. But how much does all that really matter? What do farmers stand to lose?  

Roland Fumasi, head of RaboResearch Food & Agribusiness for North America, described the nightmare scenario for global trade of agricultural goods. 

“Ultimately, the worst-case scenario would look something like: You have trading blocks around the world — basically, a group of countries that are friendly traders, and then you have another group of countries that are friendly traders with each other, and the two paths don’t cross,” he said. 

“What you’d have in that scenario is major gluts of product in certain trading blocks. … That would crash markets, ultimately could impact the value of farmland, which is critical in the food and ag space,” Fumasi continued. “And then, in the other trading block, [you’d] have major deficits of the things that those consumers and the rest of that value chain [need] to stay supported.” 

This scenario would be so disruptive to feeding the world, Fumasi said, the probability of it happening is low. 

“There’s a reason that all this food and ag trade has gone on so heavily for decades,” he said. “The world needs what the world needs, and the world needs it where it needs it. So that’s the backdrop. And we’re talking about food here. … 

“What will tend to happen then is, if the U.S. were shut down from certain markets for exports, then those countries would rely more heavily on an area like Brazil,” he continued. “Well, Brazil can’t just flip a switch and overnight start producing so much more to fill that gap. So what happens is … the Brazilian prices start to come up … to a level where all of a sudden you go, ‘OK, even with the tariffs that are in place on a U.S. product, Brazilian prices have gone up enough to where now they’re back sort of in this equilibrium.’ But this is a shorter-term phenomenon. In the medium and long run, Brazil is absolutely capable of increasing production.”

He said regardless of what happens in the short run, the long-term risk of the U.S. losing market share is being exacerbated.

“The big, longer-term risk, and this is what should and does have many people worried, is that when the U.S. is seen as a less reliable trading partner — there’s so much back and forth and things change on a weekly basis — then [countries] start to back away [and] start to rely on other countries,” he said. “That’s exactly what has happened between China and Brazil. Brazil is now meeting a much larger portion of China’s soybean needs than they have in the past. And part of the reason for that has been some of the trade disruptions with the U.S.” 

Data Fumasi provided shows China’s soybean volume imports from Brazil in 2024 were more than three times what China took in from the U.S. 

Simple Supply and Demand 

Should farmers be concerned about trade? Yes! That was the resounding answer from four farmers, representing eight commodities. 

“The bottom line is, it is vitally important for our viability as an industry moving forward,” said Caleb Ragland, who farms in central Kentucky and is president of the American Soybean Association. “We produce significantly more ag products in this country than we consume here domestically. We either have to produce significantly less, have less farms, have less ag products on the market, or we’re going to have to find ways to continue to grow and develop export markets.” 

According to the USDA, in calendar year 2024, the U.S. exported $176 billion worth of agricultural products. 

USDA Chief Economist Seth Meyer said that value is felt at the farm level.

“The more people you have bidding for your commodity, the more you’re going to get for it,” he said. “If you only have one bidder, guess who gets to set the price?”

Fumasi said that over the last couple of decades, exports have been key to supporting prices for commodities, such as corn and soybeans, as production has increased. He noted that since 2000, corn yields have increased about 32% and soybean yields have increased approximately 36%. 

“If growers aren’t able to continue to push yields, then lower yields are not supportive to land values,” he said. “In U.S. ag, everything trickles back ultimately to trying to support those underlying asset values, which have been stable to increasing over time. When you start to have major issues there in terms of land values, then you start to have some pretty big impacts on the financing side because that collateral is so critical.”