Author: Bart Fischer

Authors: Bart L. Fischer and Joe Outlaw

Over the last few weeks, much of the attention around reciprocal tariffs has centered on the Supreme Court’s ruling about President Trump’s use of the International Emergency Economic Powers Act (IEEPA) to levy tariffs. While many questions have been raised about the impact of the court’s ruling on tariff revenue already collected—with a federal judge on the U.S. Court of International Trade ruling on this issue just yesterday—this article focuses on where tariff revenue goes once it’s collected. Interestingly enough, the answer to that question is rooted in the Agricultural Adjustment Act (AAA) of 1935.

How much tariff revenue has been collected?

From 2017 to 2019, during the first Trump Administration, customs duties more than doubled (from $34.6 billion to $70.8 billion, respectively).  From 2024 to 2026, the Congressional Budget Office (CBO) estimates that customs duties will increase by 443% (from $77 billion to $418 billion, respectively), a reflection of President Trump’s renewed use of tariffs in his second term.

Figure 1. Customs Duties by Fiscal Year.

Where does the tariff money go?

So, if billions of dollars are collected in tariff revenue, where does it go?  Section 32 of the AAA of 1935 requires that 30% of tariff revenue be used to:

1. encourage the export of agricultural products;
2. encourage the domestic consumption of farm products by diverting surpluses and increasing usage; and
3. reestablish farmers’ purchasing power by making payments in connection with the normal production of any agricultural commodity for domestic consumption.

In 2017, Section 32 amounted to roughly $10.4 billion (or 30% of the $34.6 billion in tariff revenue collected in 2017).  If $413 billion in tariff revenue is collected in 2026, the Section 32 amount would balloon to $125 billion, all of which is required to be set aside for the purposes/priorities listed above.

How are these priorities being met?

While 30% of customs duties flow to USDA, USDA then transfers a small amount off the top (30% of customs receipts from fishery products) to the Department of Commerce. USDA is then required to retain a portion of the funds (roughly $1.8 billion in fiscal year 2026) as reserved spending authority to support farmers and domestic food assistance programs primarily through commodity purchases. This amount is limited and indexed to inflation. The vast majority is then transferred to the Food and Nutrition Service (FNS) for the child nutrition programs. For example, in fiscal year 2024, 94% of the Section 32 funds (or $28.785 billion) flowed through to the child nutrition programs. Otherwise, USDA has virtually no discretion in the use of Section 32 funds. 

With the tariff revenue projections for fiscal year 2026, the Section 32 funds available will dwarf total spending on the child nutrition programs at USDA. So, where does that leave farmers?

How are the tariffs being used to help farmers?

As noted above, clause 3 authorizes the use of Section 32 funds to reestablish farmers’ purchasing power by making payments in connection with the normal production of any agricultural commodity for domestic consumption. One would think Section 32 funds would be an obvious choice for helping farmers given (1) other countries have retaliated against U.S. products with their own tariffs in response to reciprocal tariffs and (2) farmer purchasing power has been decimated by inflation over the last 5 years.  INSTEAD, since fiscal year 2018—including in the fiscal year 2026 agricultural appropriations bill that was signed into law in November 2025—the appropriators have mandated that no more than $350 million in carryover from Section 32 can be used for clause 3 activities. In other words, if CBO’s projections for fiscal year 2026 hold, Congress will essentially be dictating that no more than 0.28% of the $125 billion in tariff revenue flowing to USDA can be used to help farmers.

While the Trump Administration has drawn on authority and funding from the Commodity Credit Corporation (CCC) to provide trade and economic relief via the new Farmer Bridge Assistance (FBA) program, it begs the question of why Congress continues to insist that virtually none of the tariff revenue that flows to USDA via Section 32 be used to help farmers. 

Sources:

The Budget and Economic Outlook: 2026 to 2036, Congressional Budget Office, February 11, 2026 (https://www.cbo.gov/publication/61882)

Farm and Food Support Under USDA’s Section 32 Account, Congressional Research Service, August 5, 2025 (https://www.congress.gov/crs_external_products/IF/PDF/IF12193/IF12193.5.pdf)

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Fischer, Bart L., and Joe Outlaw. “Where is All the Tariff Money Going and Is it Being Used to Help Farmers?” Southern Ag Today 6(10.4). March 5, 2026. Permalink

Bart L. Fischer and Joe Outlaw

While farmers have been dealing with inflation in input costs since the onset of COVID-19, relatively high commodity prices (in large measure resulting from the war in Ukraine) helped blunt the pain through 2022. The perfect storm arrived as commodity prices started plummeting in 2023. Over the last 3 years—from 2023 to 2025—the losses have been piling up. As noted in Table 1, the average corn, soybean, and wheat producer has accumulated roughly $300 per acre in total losses over the last 3 years. For cotton producers, that estimate is roughly $1,000 per acre.  After all their crops have been sold and all their bills have been paid, that’s how far in the hole they remain. Thankfully, the federal government has stepped in at various times to help. But, this all begs the question of what the net result over the last 3 years has been. This is especially the case as calls continue to circulate on Capitol Hill about the need for additional bridge assistance.

As noted in Table 1, Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) provided little assistance for 2023 and 2024 largely because the reference prices had not been updated since the 2018 Farm Bill.  While ARC and PLC will deliver significantly more assistance for the 2025 crop year—owing to improvements in the One Big Beautiful Bill from last summer—that assistance is not slated to arrive until later this year (October 2026). Congress also stepped up in December 2024 and created the Emergency Commodity Assisstance Program (ECAP), providing $10 billion in assistance for economic losses incurred in the 2024 crop year. More recently, Secretary Rollins announced an additional $11 billion for row crop producers via the new Farmer Bridge Assistance (FBA) program for economic losses incurred in the 2025 crop year.

That is a tremendous amount of assistance. Is more really needed? While we will leave the question of “need” to policymakers to debate, we do offer the following observations. As reflected in Table 1 and Figure 1, despite all of the aid provided, we estimate that it is covering roughly 35% of the total loss for cotton and soybeans and roughly 45% of the loss for corn and wheat. In other words, farmers have had to shoulder roughly 55% to 65% of the loss on their own over the last 3 years. If nothing else, this should bring into focus the magnitude of the challenge they’ve been facing. Perhaps most daunting: they are facing a situation where the outlook suggests the losses will grow even larger next year. 

Table 1. Cumulative Farm Losses for the Major Row Crops, 2023-2025F.

2023-2025F Cumulative Totals	Corn	Soybeans	Wheat	Cotton
Total Revenue ($/ac)	2,333.29	1,675.04	883.67	1,760.67
Total Cost ($/ac)  a/	2,677.12	1,971.53	1,183.80	2,797.21
Net Returns ($/ac)	-343.83	-296.49	-300.13	-1,036.54
ARC/PLC ($/ac) – 2023-24 Crop Years	10.98	10.50	4.94	30.72
ARC/PLC ($/ac) – 2025 Crop Year b/	65.66	28.97	54.52	133.05
ECAP ($/ac) – 2024 Crop Year	42.91	29.76	30.69	84.74
FBA ($/ac) – 2025 Crop Year	44.36	30.88	39.35	117.35
Total Farm Bill & Ad Hoc Assistance ($/ac)	163.91	100.11	129.50	365.86
Share of Loss Covered by Aid	48%	34%	43%	35%

Figure 1. Share of Cumulative Farm Losses for the Major Row Crops Covered by Federal Assistance and Borne by Producers, 2023-2025F.

Now, for a couple of technical points. First, some may ask why we didn’t include crop insurance indemnities or natural disaster aid (think the Supplemental Disaster Relief Program) in our analysis. The reason: our total revenue estimates in Table 1 use marketing year average prices and harvested yields. Our assumption is that any crop insurance indemnities or disaster aid payments simply help partially restore producer revenue. As a result, total revenue is an appropriate proxy. Second, some may ask why we focused only on the 4 major row crops with more than 10 million base acres. The primary reasons for this were that the ARC/PLC average payments are very sensitive to acreage assumed, and there is a significant difference between base and planted acreage for these smaller-acreage crops. While that will likely change with the new addition of base acres in the One Big Beautiful Bill, it remains a limitation for analyzing the 2023-2025 period that would likely skew our results. Further, for some of the smaller-acreage crops, payment limits are significantly binding. Without a reliable way to incorporate the effects of payment limits into this analysis, the estimated payments would be significantly over-stated. While some of these challenges also impact the major row crops, in our opinion, they are less pronounced. So, while we may follow up on this analysis in the future, for today we focused on the 4 major row crops.

Bottom line: for the major row crops, while the federal government has provided a significant amount of assistance, farmers are shouldering even more of the loss, and they are facing a growing season in 2026 that may well compound the loss even more. In dealing with the uncovered losses already incurred, producers have only so many options: (1) watch their equity erode in proportion to the losses they’ve faced; (2) to the extent that equity is gone they can [try to] borrow money to cover the losses; or (3) they go out of business. They are going through that mental math while also trying to cash flow the upcoming year.

One final point: we appreciate more than most the difficulty of getting anything done in Washington, D.C.  We also encounter producers every day who are very grateful that policymakers have stepped up to the plate to help keep them on their farms during these very trying times. But, we’d be remiss if we didn’t also note that over the last 3 years, as a nation,  we’ve essentially been asking farmers to put their livelihoods on the line – with very little hope for profits – to keep raising food and fiber…while hoping that the federal government will deliver relief at the 11^th hour to help keep them there.  One of us is married to a rocket scientist…but it doesn’t take a rocket scientist to know this isn’t sustainable.

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Fischer, Bart L., and Joe Outlaw. “Is More Bridge Assistance Really Needed?” Southern Ag Today 6(6.4). February 5, 2026. Permalink

We think we can all agree on one thing: we’re all sick of talking about the state of the farm economy. After 8 years of ad hoc disaster assistance propping up the farm economy, most producers we know are desperate for market prices to return to levels that will at least cover their costs of production which have exploded over the last several years. They want to move on from ad hoc assistance, in part, because there are growing concerns that much of that assistance is simply finding its way into even higher land values (or higher cash rents) or higher input costs. Further, while the One Big Beautiful Billmade a significant down payment on improving the standing farm safety net beginning with the 2025 crop year, most of that assistance will not arrive until October 2026. Even then, once that assistance arrives, it will still fall far short of the losses currently facing producers. The trade discussion has injected even more uncertainty into the markets, although the recent agreement with China has provided somewhat of a reprieve (even if it’s not yet clear how and when China will fulfill the commitments they’ve made).

While all of these issues were reaching a fever pitch earlier this fall, the government shutdown over the past 2 months sucked most of the oxygen from the room. Congress recently reached an agreement to open the government, including passing a few of the appropriations bills, but that deal did not address impending losses for the 2025 crop year or uncertainty going into the 2026 crop year. 

We are growing increasingly concerned that too little attention is being paid to the challenges growers continue to face. Yes, there is some talk about trade aid, but that is just one element of the challenges facing growers. Last year, Congress provided $30.78 billion for economic ($10 billion) and natural disaster ($20.78 billion) losses. As noted in Figure 1, the losses facing producers (on prices and costs of production alone) in 2025 eclipse those from 2024—yet Washington has been eerily quiet on the topic, having committed $0 at this point for 2025 losses. 

In examining Figure 1, soybeans is the only crop to see an improvement in projected losses from 2024 to 2025, owing largely to the announced agreement with China and the projected $0.50 per bushel rebound in prices in USDA’s latest World Agricultural Supply and Demand Estimates. Even then, soybean producers are still projected to lose in excess of $100 per acre this year. In fact, all of the major commodities for which USDA reports costs of production are expected to face losses in excess of $100 per acre, with some crops like rice seeing losses double the amount of last year. And, Figure 1 is only covering losses for those crops for which USDA tracks cost of production. Other crops—for example, sugar—are also facing enormous losses. In virtually all cases, chronically low commodity prices—exacerbated by trade uncertainty—coupled with stubbornly high costs of production are the main culprits.

With news of thawing tensions on trade, the hope is that policymakers in Washington will be able to turn their attention to the huge issues facing row crop producers as they work to wrap up 2025 and prepare for the 2026 crop year. And, while growers may be growing wary of ad hoc assistance, we see little alternative in the short run. Ideally, efforts to craft a Farm Bill 2.0 will eventually make additional needed improvements to the farm safety net so we can close this nearly decade-long chapter on ad hoc assistance.

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Fischer, Bart L., and Joe Outlaw. “Disaster Assistance for 2025: Is it Coming or Not?” Southern Ag Today 5(47.4). November 20, 2025. Permalink

We often use Farm Policy Thursdays at Southern Ag Today to address questions we’ve been hearing, either from producers or from the general public. Today is no exception. With all the talk about low crop prices and high input costs, we increasingly are getting questions like these: “If farmers are projected to lose money this year, then why plant anything?  And, isn’t the market telling them there’s too much supply and they should plant less?”  

On the surface, those are pretty simple and relatable questions.  But, as with most things in agriculture, the answer is much more complex.

• If a farmer has sufficient cash on which to live and no debt to service, that might work.  But, unless that applies to you or you have a job off the farm that provides supplemental income, shutting down would be guaranteeing no income for the farm/family for the year.

• U.S. farmers must also contend with the fact that they operate in a global market. If U.S. farmers were to simply sit out this growing season, how would the rest of the world respond? Would they also idle their operations, allowing prices to rise so that everyone could enjoy higher prices together? Of course not. While we could fill pages on this topic, the bottom line is that prices would certainly rise, but other countries would likely ratchet up their production to take advantage of those prices at the expense of U.S. farmers. 

• Perhaps the most important factor is that farmers are eternal optimists. After all, they are putting a seed in the ground in hopes that sufficient rain will fall for the seed to germinate. They then spend months tending to plants to ensure that weeds and insects don’t choke the plant out. Many spend the rest of the time praying that hail, floods, snow, and hurricanes—you name the disaster—won’t leave the crop in tatters. With that same spirit, they also plant that crop in hopes that the market will turn around by harvest time so they can make enough money to pay off the banker and have enough left over to feed their families and start over again next year.

• Most farmers we know and work with have chosen that profession—in spite of all the risks and historically low returns—because they want to help their fellow man. Farming isn’t a job…it’s part of who they are. Simply sitting out a crop isn’t really in their DNA.

We suspect those answers would be followed by this question: “Okay, I understand they can’t totally idle their farm, but can’t they just shift from one crop to another that makes more economic sense?”

• We would argue that farmers are always considering that option, but that generally only works if those opportunities exist.  At this point, most crops are facing negative returns, and it’s not remotely clear that one crop would be preferred over any other, especially after accounting for all of the things farmers can’t control. 

• Most farmers that grow multiple crops have a carefully crafted, multi-year rotation that they want to maintain for a variety of reasons (e.g., controlling weeds, maintaining fertility and soil health, controlling erosion, etc). 

• Often equipment and supporting infrastructure is crop specific, limiting the ability for farmers to substitute crops (or at least serving as a consideration). For example, the only thing you will accomplish by running a cotton picker through a corn field is creating a giant mess.

In summary, simply not planting a crop is just not a viable option for most farmers, and shifting the crop mix—while always under consideration by farmers—comes with its own set of considerations and challenges. It’s for these reasons, in part, that each Congress and successive Administrations have repeatedly supported farmers when things do not turn out as they planned or hoped.

Fischer, Bart L., and Joe Outlaw. “If Crop Returns are so Bad, Why Do Farmers Keep Planting?” Southern Ag Today 5(43.4). October 23, 2025. Permalink

A common question we’ve been fielding since passage of the One Big Beautiful Bill: “with all this money coming from the Federal government, why do farmers keep complaining?”  It’s generally followed by: “you just can’t make some people happy.”

There’s no question the Federal government has provided a robust level of assistance. For example, the American Relief Act in December 2024 provided $30.78 billion in relief—$10 billion for economic assistance and $20.78 billion for natural disaster assistance. The recently-passed One Big Beautiful Billprovided approximately $62 billion (10-year total) in improvements to the farm safety net.^[1] While these sound like big numbers—because they are—it’s important to put them in context.

First, for the $10 billion in economic relief from the American Relief Act—implemented by USDA as the Emergency Commodity Assistance Program (ECAP)—Congress required USDA to calculate losses from the 2024 crop year and then limited the amount of assistance to 26% of the loss. In other words, for losses incurred by producers last year, they were required to shoulder 74% of that loss on their own. 

Second, for the $20.78 billion in relief for natural disasters in the American Relief Act—implemented by USDA as the Supplemental Disaster Relief Program (SDRP)—Congress limited USDA to covering no more than 90% of losses incurred in 2023 and 2024. While that certainly sounds like a lot, once the total losses were estimated by USDA, they were only able to cover 35% of the losses based on the funding provided by Congress. So, SDRP effectively covers, at most, just under 32% of the loss (or 35% x 90%).  

Importantly, ARC and PLC also will help cover losses from the 2024 crop year once paid in October 2025, but that assistance is at the old levels last adjusted more than a decade ago in the 2014 Farm Bill. In other words, the relief provided by the American Relief Act was all retroactive for losses already incurred and only covered a portion of the losses.

What about the 2025 crop year?  While the One Big Beautiful Bill made several improvements to the farm safety net—from increasing reference prices from 10-20% to adding up to an additional 30 million base acres nationwide—most of the improvements kick in with the 2025 crop year. Congress stipulated (using the same schedule that has been in place since the 2008 Farm Bill) that payments cannot be made until October 1 of the year following the end of the marketing year for a crop.  Translation: the new assistance won’t go out the door until October 1, 2026. Yes, you read that right. Further, the magnitude of the projected losses to the 2025 crop are such that the assistance will, yet again, only cover a small portion of the loss. Consider the following example:

The estimated national average cost of production for soybeans in 2025 is $639.15/ac.^[2] Using USDA’s August 2025 World Agricultural Supply and Demand Estimates (WASDE), the expected return for soybeans is $535.80/ac (or a planted-acre yield of 53.05 bu/ac x $10.10/bu), for an expected loss of $103.35/ac (or $1.95/bu).^[3] The question is how much of that loss will be covered by the new-and-improved ARC and PLC.  At present, PLC is projected to pay $0.61/bu and ARC—assuming average yields—would pay $0.85/bu.^[4]  Assuming the farm is fully based—where both ARC-CO and PLC use a payment factor of 85%—you effectively receive $0.7225/bu (or 85% of $0.85/bu).  In other words, while the One Big Beautiful Bill provided significant improvements, in the case of soybeans (and virtually every other row crop to varying degrees), it will cover just 37% (or $0.7225/$1.95) of the loss…when it arrives next year. Losses upon losses. Starting to see why folks are concerned?

To pull all of this together: yes, significant assistance has been provided to the countryside, but on average, it only covers a fraction of the past/projected losses.  That is why you are hearing a collective groaning in the countryside.  What to do about it?  Absent new trade deals that spur additional demand, a renewed focus on in-kind food aid, or commodity-specific demand levers (think ethanol for corn)—and perhaps in addition to all of those things—we suspect Congress will begin contemplating yet another round of disaster aid this fall and/or the Trump Administration will begin discussing intervening with trade aid. To those asking us the questions at the top of this article and for the record: we’ve never met a farmer who preferred getting their income from the government…and they can’t wait to break this cycle of praying to simply break even.

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^[1] According to the Congressional Budget Office’s estimates of outlays in Subtitles C (Commodities), D (Disaster Assistance), and E (Crop Insurance) in Title 1 of the One Big Beautiful Bill (https://www.cbo.gov/system/files/2025-07/61570-pl119-21-2025Recon-CLB.xlsx).

^[2] https://ers.usda.gov/sites/default/files/_laserfiche/DataFiles/47913/cop_forecast.xlsx?v=30009

^[3] https://www.usda.gov/oce/commodity/wasde/wasde0825.pdf

^[4] PLC: https://www.fsa.usda.gov/documents/2025-plc-pdf; ARC: 90% of $12.17/bu (or $10.95/bu) less $10.10/bu.

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Fischer, Bart L., and Joe Outlaw. “Why So Much Concern in the Countryside?” Southern Ag Today 5(35.4). August 28, 2025. Permalink