Agriculture is an easy target for retaliatory tariffs when trade policies come under fire. As a result, farmers are finding themselves with a surplus crop. Even if tariffs are implemented for a short period, the agriculture market will be impacted. However, this does present a unique opportunity for financing a farm to focus on specialty crops.
US Farmers Are Facing Significant Impacts of Tariffs
US farmers have been impacted by tariffs in numerous ways. While the most obvious is the decline in exports, farmers also find themselves facing higher production costs due to tariffs placed on pesticides and turf protection products. While many of the effects are felt in the short run, many more serious long-term implications may come from these tariffs.
Short Term Impact of Tariffs
The retaliatory tariffs being imposed on US agricultural products are having a significant impact that is already being felt by farmers. Impacts that are already being felt by farmers across the country include:
- Decreasing agricultural product purchases by countries implementing tariffs
- Declining commodity prices
- Increases in production costs
- Fewer export prospects
- Significant revenue losses
- Declining US farm prices
Long Term Impact of Tariffs
The longer the tariffs are imposed against agricultural products in the US, the more profound of an impact they will have. In fact, the industry is still dealing with the effects of tariffs in the 1970s and 1980s. This is the period when Brazil became the major export competitor for the US soybean industry.
The impact of these tariffs is likely to be felt for many years to come. This may include:
- New trade alliances between foreign partners
- Increased supply from competitor markets
- A strengthened soybean industry in Brazil
- Tens of thousands of lost jobs
- Economy-wide losses in the $billions
Many of these long-term effects of tariffs are already being realized as Russia has pledged land to China, and countries including Brazil, Canada, Australia, and the EU have all increased exports to China.
Targeting More Than One Sector in the Ag Industry
When tariffs are imposed against grains, the livestock sector tends to benefit from cheaper feed. Likewise, processed foods using these raw agricultural products also benefit from cheaper grains. However, the current situation with China is unique in that both the livestock sector and processed foods are also facing tariffs.
Taking Advantage of the Tariffs
Even though the prospects may be bleak for the traditionally exported crops, there is a silver lining – the opportunity for growth by focusing on specialty crops. As large farms begin to consolidate and sell off land to stave off bankruptcy, financing a farm is an opportunity for new farmers to pursue. By selling part of their land, struggling farmers can keep their farms. Meanwhile, financing a farm is giving new entrants the chance to make inroads focusing on a variety of crops.
A Unique Opportunity
If you’ve always wanted to start a farm, now may be a prime chance as farm prices are starting to decline and farmers begin to sell part of their land. Talk to one of our loan officers today about financing a farm. They can answer any questions you may have and can help you get the process started.