by Vance Ehmke
March 4, 2025
Big things are happening on the farm. Let’s take a look at three of them:
Trump, tariffs and interest rates/inflation.
1. The Trump effect. So far, farming has taken a number of major hits by elimination of USAID and then severe cuts to USDA personnel and programs. And I certainly don’t expect the cuts to stop there.
There are a lot of other places that Trump policies can show up like with many direct support programs as well as subsidies going to crop insurance and other conservation measures. Currently NOAA and the National Weather Service are under attack with major firings. I’m also hearing reports of cutting checkoff programs. And all of this says nothing about other policies that could involve such things as tariffs which, too, could have very negative effects on net farm income. Not only that but through tariffs, for instance, we are telling our best ag customers to take their business elsewhere. And they are listening.
In short, I see absolutely no good for farmers coming out of Trump’s desire to overhaul government. However, there is one exception and that is in lower Federal income and estate taxes. Of course, Warren Buffett sees lower tax rates favored by Trump as a problem only adding to our soaring fiscal deficit.
In summary, farmers are having a tough time today making money and I fully expect the trend to lower net farm incomes to continue and to be felt for years into the future. For instance, a prominant land-grant university wheat breeder said because of cuts to USDA, “We just got rid of the future”.
2. Tariffs. I would like to think by now we would have learned the lesson that tariffs do two things: they cause prices for what farmers sell to go down and prices for what we buy to go up. Are we destined to re-learn this lesson?
Here’s a case in point. I recently asked a distributor for undercutter blades what a 6-foot tillage blade cost. He said it was $600…and you had to wait 10 months to get it. But as fate would have it, he said the only steel mill in the world that makes undercutter blade steel is in Canada, of all places. And if we decide to beat up on our good friend Canada with tariffs (which we just did), you can instantly add another $150 to the price through their retaliation. Bottom line is if you need blades, I hope you bought them last year or can find a dealer who still has inventory and lower prices.
And to that point, CoBank ag economists say farmers prepaying at yearend for future input needs is off by a huge 50%. That says two things: net farm incomes were weak last year and if farmers had to delay purchases, they may end up paying higher prices for this year’s inputs. Row crop seed prices, for instance, are cheaper in the fall and highest in spring.
3. Interest rates/inflation. Who knows what the future will bring. But if you’re expecting roaring inflation, debt is your friend. And that’s reinforced by all the people who are buying gold.
But another reality is we have high real interest rates and a weak farm economy. And to the people who are looking at that reality, debt is an enemy…it’s just another expense that needs to be minimized. Another way of looking at high interest rates is to see them as an investment opportunity. And paying off debt is one of the few opportunities we have in agriculture to show a positive return on investment. In other words, it sure beats growing corn or soybeans or wheat. And, yes, this means if you don’t need it, don’t buy it–especially if you have to borrow money to do it.
When you combine that with all of the uncertainty we have either politically or in the market place, I’d pay down on debt….and fast. Further, I don’t think we’ve really begun to see the lows in the land market. Low net farm incomes ultimately show up in lower land prices and cash rents. Plus, why buy today when it’ll be cheaper tomorrow? But again, that’s just me: In front of every silver lining, there’s a dark cloud!
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