We often are asked by the media about the size of and need for government assistance that is provided to U.S. farmers when something goes wrong (e.g., bad prices, yields or both). The first thing we do is highlight that the safety net provided for by Congress is designed to offset some – but not all – of the risks faced by farmers. It might sound like semantics, but in the policy world…words matter.
The rest of the conversation generally involves talking about uncertainty in U.S. agriculture. Rather than provide an exhaustive list here, let’s just focus on the three primary determinants of profitability: prices, yields and costs.
- U.S. farm prices are determined by world supply and demand for the crop, the price of its substitutes, and policy. What type of policy? First, U.S. producers must compete against producers that are heavily subsidized by the governments of our competitors around the world. Second, the trade policies of those countries (such as tariffs or other non-tariff barriers to trade) impact prices received by U.S. producers as well. Third, monetary policy in the U.S. impacts interest rates that farmers have to pay to finance their crops, land and equipment and exchange rates that tend to make our exports relatively more expensive than our competitors. Other types of policies that can impact U.S. crop prices are conservation, biofuels, taxes, and more recently health regulations such as those listed in the MAHA report that questions the health impacts of certain agricultural products (e.g., sugar) or bi-products (e.g., vegetable oils).
- U.S. farm yields are primarily impacted by weather…enough said about that.
- U.S. crop production costs are impacted by the supply and demand of each of the individual inputs, from seed, fertilizer, and chemicals to equipment, farmland, and labor, among others. Increasingly, for many producers, these purchases also must be financed at elevated interest rates. In addition, all of the policy areas discussed under farm prices above can also impact crop production costs.
These conversations usually conclude with an explanation that, even though there is a lot of uncertainty, U.S. farmers understand how the forces of supply and demand impact crop prices and input costs and are accustomed to dealing with erratic weather. However, it’s the uncertainty that comes from policy that keeps them up at night. In our minds, the government safety net helps reduce some of their and their lender’s uncertainty regarding the ability to remain viable and able to try again next year in search of profits.
Outlaw, Joe, and Bart L. Fischer. “Dealing With Uncertainty in Agriculture.” Southern Ag Today 5(25.4). June 19, 2025. Permalink
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