China is a big buyer of US soybeans. These farmers are bracing for tariff impact.
| Tolono, Ill.
More than just clouds hang over Jeff Fisher’s farm here in central Illinois. High costs, low crop prices, and a stack of bills worry him. Tariffs and other possible retaliation from China, the key export market for Mr. Fisher’s soybeans, have boosted the usual uncertainty.
Spring planting is supposed to reinforce farmers’ innate optimism. This year, the mood is subdued.
“I’m getting squeezed from in front; I’m getting squeezed from behind. I’m getting squeezed a lot of times from the right, and sometimes I’m getting squeezed from the left,” says Mr. Fisher, sitting in his tractor, while intermittent rain keeps him from planting. “So which direction do you go to get some relief?”
Why We Wrote This
One reality of America’s current economic uncertainty, caused partly by tariffs, is that farmers are having to adjust plans for this year without knowing what supplies and prices will be.
The stress runs especially high here in Illinois, the United States’ No. 1 soybean-producing state. Soybean prices have fallen to four-year lows. The U.S. Department of Agriculture forecasts that the average farmer will lose $100 for every acre of soybeans they plant. The same holds true for corn, but soybeans are far more vulnerable to trade retaliation. The U.S. exports about 15% of its corn; for soybeans, it’s roughly half. Most of those go to a single customer: China.
Those losses could grow due to new tariffs. China, which last year bought $12.8 billion of American soybeans, has now imposed new duties. That’s more than doubled the cost for Chinese processors who buy from the U.S. Instead, they’re buying increasingly from South America, particularly Brazil, already the world’s No. 1 soybean exporter.
Next year, Brazil is expected to increase production. U.S. producers, by contrast, will struggle to maintain their export volumes, economists say. The industry is looking to increase nonfeed uses of soybeans, including biodiesel and plastics.
If the U.S.-China trade war drags on, “There is the potential to get quite a bit worse on the price side,” says Scott Gerlt, chief economist at the American Soybean Association in St. Louis. He estimates that current Chinese tariffs could slice an extra 50 cents off the already low price of soybeans. They’re currently hovering around $10 per bushel. If Chinese tariffs escalate, the impact could be a full dollar discount on prices, he adds, due to weakened Chinese demand putting downward pressure on prices.
Even without tariffs, this was already shaping up as a difficult year. After some very profitable years in the early 2020s, record soybean harvests around the world lowered prices. Inflation has raised farmers’ costs for everything from seed and fertilizer to farmland rentals, eating away at financial reserves they may have built up during the good years.
U.S. Department of Agriculture
Then there’s the weather uncertainty, which can make or break the harvest, no matter how promising spring planting looks.
“Yes, tariffs have an impact,” says Michael Deppert, a farmer in Green Valley, Illinois. “But there are a lot of risks [and] so many different issues that are going on right now that you can’t really pinpoint one thing or another. It’s the accumulation of everything.”
The gloom isn’t spread evenly in farm country.
Cattle ranchers are enjoying a banner year because beef prices are high and input costs are low. They’re paying less to feed their cattle because soybean and corn prices are down. Hog producers, too, are looking for a rebound after losing, by one count, an average of $1 per hog they sold last year.
The prices of major crops have fallen sharply, but most established farmers such as Mr. Fisher and Mr. Deppert should survive because their costs are lower. Economists say that newer farmers, who have to rent most of the land they farm and sometimes the equipment as well, will probably lose money this year, barring some unforeseen circumstance.
“For them, it is a very severe situation,” says Pat Westhoff, director of the Food and Agricultural Policy Research Institute at the University of Missouri. “Many people had a lot of reserves built up in 2021 and 2022, [but] those reserves have been pulled down very sharply” or disappeared entirely. The Federal Reserve Bank reports that farm debt at rural agricultural banks rose a notable 7% last year, led by farmers borrowing to pay for the inputs they need for spring planting.
The political impact seems muted so far. In rural farming areas, which overwhelmingly supported President Donald Trump in last year’s election, most farmers don’t support the president’s tariffs, according to a March poll. Still, the administration has suggested it will step in and help financially, just as it did during the first U.S.-China trade war in 2018. So there’s a willingness to wait and see how it plays out, even here in hard-hit soybean country.
“This tractor, that planter, everything I own has a lot of steel in it. And it’s being imported from Japan and China and so forth,” says Mr. Fisher. “So Trump has done some good” by using tariffs to revive American manufacturing, he continues. “Short-term pain is worth long-term gain.”
If the administration can reach trade deals that boost exports of U.S. farm goods, that could be a net plus, he adds.
And it’s planting time. Farmers here have already started putting seeds in soil so rich, it turns black when it rains.
“It’s going to be super challenging, especially financially,” says Mr. Deppert, the Green Valley farmer. But “We’re in a good spot because the weather is great here right now. So it’s time to plant – time to get your mind off some of the planning and some of the other things that can get a guy down.”
