The U.S. Agricultural Sector Under Stress

The Issue:

The U.S. agricultural sector is facing multiple challenges. High input and production costs together with low commodity prices for some of the country’s major crops — including soy, corn and wheat — contribute to slim or even negative profit margins for these crops and forecasts of low net farm incomes. The Trump administration’s trade and immigration policies are adding to the challenges and increasing the economic uncertainty facing the agricultural sector. In this context, the Trump administration is considering providing several billions in additional support to farmers. But the source of the funds is unclear and difficult to resolve in the midst of a government shutdown.

Agricultural exports account for more than 20% of the value of U.S. agricultural production. Bulk commodities such as soybeans, corn and wheat make up the leading exports in terms of value.

The Facts:

• Net farm income excluding government support is forecast to be flat in 2025. Livestock producers have seen strong performance driven by high prices for animals and animal products. But two years of declining commodity prices combined with higher production costs contributed to declining real farm incomes from commodity sales in 2023 and 2024. For 2025, the U.S. Department of Agriculture estimated that real farm income from commodity sales will not be very different from 2024 (see chart). If government support is taken into account, overall farm net income is forecast to increase in 2025. But this is largely due to additional disaster relief authorized by Congress to compensate for losses due to natural disasters in 2023 and 2024. The farm sector is showing signs of stress. Farm debt is at record levels, with total farm sector debt forecast to increase to $386.4 billion in 2025. High interest rates have raised the cost of borrowing money and total interest rate costs of farm operations for 2025 are estimated to be 17.7 percent greater than in 2023 (author’s calculations using USDA data). Bankruptcies are on the rise: with 181 farm bankruptcies in the first half of 2025, bankruptcies are on pace to exceed the 2024 figure of 216, although still well below the levels before the pandemic.
• Tariffs have increased the costs of many agricultural inputs. The Trump administration has imposed a series of tariffs on many products, including steel, equipment and parts, as well as insecticides, herbicides, and inputs used for fertilizer production, based upon section 232 of the Trade Expansion Act of 1962; it has also imposed tariffs against Chinese imports under authority granted by Section 301 U.S. Trade Act of 1974; and it has imposed universal tariffs under the International Emergency Economic Powers Act (IEEPA) — an authority that has been challenged in court and is slated to be considered by the U.S. Supreme Court (see here). As a result of tariff actions, the average effective tariff rate on agricultural inputs had jumped from 1 percent to 12 percent as of August 2025. Pesticides, tractors and machinery face the highest increases. Effective tariff rates on herbicides and pesticides are 20 percent or higher, while tariffs on phosphate and nitrogen, used in fertilizer production, are currently subject to average effective rates near 10 percent. Tractors and other agricultural machinery and parts saw average effective tariff rates rise from near zero to 16 percent and 13 percent, respectively (see here).
• Foreign responses to U.S. trade measures have resulted in a decrease in certain U.S. agricultural exports — especially soybeans. Agricultural exports account for more than 20 percent of the value of U.S. agricultural production, with bulk commodities such as soybeans, corn and wheat making up the leading agricultural export products in terms of value. During the trade tensions of the first Trump administration, foreign countries retaliated to U.S. tariffs with trade actions that impacted U.S. agriculture. In this instance, U.S. soybean producers have taken the largest hit. China has been the top buyer for U.S. soybeans — purchasing more than half of U.S. soybean exports in a typical year. But China had purchased no soybeans at all from the United States in September, a month in which purchases were over 3.5 million metric tons in 2023 and 2024. Furthermore, there are no commitments as of now to purchase any in the remainder of the Marketing Year (September to August), something that has not occurred in two decades. Brazil, which has seen its soybean production surge by 40 percent since the first trade war in 2018, has set a record for soybean shipments to China from January to August. Argentina, the world’s third largest soybean producer, is also expected to make up a growing share of exports to China. Overall, the trade tensions have added a layer of uncertainty to future U.S. agricultural exports. Canada, the EU, and Mexico have threatened retaliatory tariffs in response to various tariffs, implemented or threatened, by the United States. So far, the majority of these tariffs have been paused, pending completion of negotiations. 
• As a result of restrictive immigration and removal policies, the agricultural sector could see increased labor shortages. Undocumented immigrants comprise a disproportionate share of employment in agriculture. About two thirds of agricultural workers in crop and crop-related work are noncitizen immigrants and surveys indicate that nearly half lack work authorization. The share of undocumented workers is significantly higher in specialty crops, such as vegetable, greenhouse and fruit and nut operations, where labor costs are a major component of agricultural costs. There are some warning signs that a fall in agricultural employment is taking place: March-July changes in the agricultural sector and related workforce were positive in 2023 and 2024 in Bureau of Labor Statistics data, but negative in 2025, decreasing by 155,000, according to one report. Econometric models of the effect of reduced immigration and removals of undocumented workers on agriculture find reduced sectoral output and elevated prices as a result. The U.S. Department of Labor formally acknowledged in an October 2, 2025  filing in the Federal Register that the federal government’s efforts to enforce immigration laws could lead to “significant labor market effects in the agricultural sector.” The filing, which seeks to make it easier and less expensive for farmers to hire foreign farm laborers through the H-2A visa program, states that “without immediate action from the Department to assist employers in securing a reliable workforce alternative, labor shortages will likely intensify, driving up production costs, limiting output in key sectors such as fruits and vegetables, and increasing reliance on imported food products.”
• In the previous trade war, the Trump administration used one of the government’s key agricultural support programs to offset negative impacts arising from retaliation. In 2019, the government directed $28 billion worth of relief towards farmers burdened by foreign tariffs using the Commodity Credit Corporation (CCC), which is usually empowered with $30 billion in borrowing ability in order to support the farm industry. The CCC funded three programs to provide assistance for farms impacted by foreign tariffs: the Market Facilitation Program, which makes cash payments to farms; the Food Purchase and Distribution Program, which buys and distributes surplus products; and the Trade Promotion Program, which funds the creation of new export markets abroad. There has been some debate over how the payouts were calculated and distributed. More broadly, there are concerns with how this relief program has increased the farm industry’s dependency on government aid. According to projected figures for 2025, 22.4 percent of farm net cash income will come from federal programs including disaster assistance and insurance (author’s calculations based on USDA data).
• The Trump administration is once again considering a bailout of the agricultural sector. Reports suggest the Administration is considering a $10-14 billion package for the farm sector, targeted at soybean farmers. However, most of the funding for the Commodity Credit Corporation was removed in the One Big Beautiful Budget Act (OBBBA) of 2025, with only $4 billion remaining for use, forcing the Administration to look elsewhere for funding.