\u201cTariff uncertainty has certainly been a factor in driving fertilizer prices higher, even with exemptions carved out for most fertilizers,\u201d Daniel Cole, a Bloomberg Intelligence analyst, said by email. While other issues \u2014 including China\u2019s decision to curb some exports and recent production outages in the Middle East \u2014 have also fueled the rally, the fertilizer industry \u201chas largely been in a state of confusion since the tariff rollout.\u201d\u2026 Tariffs have constrained shipments of phosphate and potash to the US, and are expected to \u201cremain subdued\u201d because of tariffs, producer\u00a0Mosaic Co.\u00a0said earlier this month.<\/p>\n
As you can see in the chart below<\/a>, U.S. fertilizer prices are still below where they were in 2021-22, but they\u2019ve consistently climbed since January to levels well above where they were before 2021:<\/p>\n As Bloomberg notes, trade policy isn\u2019t the only thing going on here, but it surely deserves much of the blame. As Sen. Chuck Grassley of Iowa recently opined <\/a>on Twitter, in fact, the \u201cfastest relief for farmers\u201d facing relatively high fertilizer costs would be \u201clowering duties on fertilizer imports.\u201d<\/p>\n American farmers\u2019 cost pressures also extend beyond fertilizer. Farm machinery and equipment, for example, have also been hit by tariffs in several ways. Most obviously, tariffs on imports<\/a> of foreign-made products are leading to price hikes here:\u00a0<\/p>\n \u201cAll of our competitors and us have certain products that are going to be more expensive,\u201d said Eric Hansotia, CEO of tractor maker Agco, which has recently announced some price hikes in North America.<\/p>\n As the Wall Street Journal just documented<\/a>, imported farm equipment (and other machinery) is also getting hit by complicated new rules for U.S. steel and aluminum tariffs:<\/p>\n The effective tariff facing exporters now varies depending on a product\u2019s metal content. For a machine worth $1 million with a 20% steel content, the rate would be 50% of $200,000 and 15% of the rest, resulting in a $220,000 levy per machine\u2014or a 22% tariff. The U.S. has said it would review the metals tariff list every four months, adding to the uncertainty. <\/p>\n And the tariffs\u2019 complexity adds to the costs that imported farm machinery now faces:<\/p>\n [European producer] Krone says it must now document the steel and aluminum content of the 15,000 parts that make up its Big X forage harvester, for instance. Between 10% and 15% of the company\u2019s farming-equipment sales go to North America. Even companies whose products aren\u2019t subject to the steel tariffs can get ensnared. \u2026<\/p>\n Take valves, a commodity device to regulate the flow of liquid in a machine. Valves aren\u2019t on the expanded steel tariff list but are used in injection-molding machines. Since these machines are on the list, their manufacturers must now obtain from their suppliers information about the steel content of their valves\u2014where it was bought, at what price, and where the metal was melted and poured.<\/p>\n The Journal goes on to note that companies ensnared by this mess aren\u2019t planning to bring much manufacturing capacity into the United States due to \u201ca dearth of skilled labor and high production costs.\u201d This includes, the paper explains<\/a> elsewhere, Agco\u2014the third largest farm-equipment seller in the United States, with production here and abroad (mainly Europe). Because the company doesn\u2019t sell enough here to justify onshoring more production, it will simply sell tractors in the U.S. market with the \u201cnecessary\u201d price hikes\u2014new tariff costs that will likely deter any U.S. expansion and weigh on American farmers.<\/p>\n The pain also extends to the United States\u2019 own John Deere. As the Journal notes, for example, about 20 percent of the company\u2019s German output is exported to the U.S., and it has no intention of onshoring that production and will instead simply eat or pass on the tariffs. The company also has a large U.S. manufacturing footprint<\/a> (30,000 employees at 60 facilities nationwide), which is also being hit by tariffs\u2014and higher prices for U.S. goods\u2014on steel, aluminum<\/a>, copper, engines<\/a>, and other key inputs. No surprise, then, that Deere recently reported<\/a> that it\u2019s paying hundreds of millions of dollars in additional tariff-related costs\u2014costs that will be borne by the firm\u2019s workers (hence, recent U.S. layoffs), shareholders, and customers (i.e., American farmers).<\/p>\n Finally, U.S. immigration policy is pressuring farmers\u2019 labor costs. As CNN recently reported, for example, farmers across the country are struggling<\/a> to find workers because widescale deportation efforts have ensnared many immigrant laborers and scared off many others\u2014both illegal and legal. Given the large share of immigrants working in agriculture\u2014along with native-born workers\u2019 distaste for the work\u2014the result of the administration\u2019s focus<\/a> on immigrant farm workers is higher labor costs<\/a> for the remaining workers and\/or simply less production<\/a>. No wonder, then, that \u201cin the latest Farm Journal Ag Economists\u2019 Monthly Monitor, 87 percent of economists said the U.S. immigration system is broken for agriculture\u201d\u2014with little hope<\/a> for reform any time soon.<\/p>\n \nAnd Their Prices Are Down\n<\/p>\n American farmers might be able to weather (pun!) these higher costs if they were able to charge even higher prices for the stuff they grow, but as of early August<\/a> prices were down too: \u201cA benchmark for corn, soybean and wheat prices has fallen to its lowest levels since the height of pandemic lockdowns amid ample supplies globally, cutting into farm revenues.\u201d (Corn prices have rebounded<\/a> a bit since then, but remain well below where they were in February.)\u00a0<\/p>\n Government policy again deserves much of the blame, and trade is again the place to start. Trump\u2019s tariffs and related antagonism have caused buyers abroad to turn away from U.S. agricultural products, meaning fewer sales abroad for export-dependent farmers and, given the glut of unsold crops, lower prices at home. As Bloomberg recently reported<\/a>, the biggest problem here is undoubtedly China:<\/p>\n America\u2019s farmers are expecting bumper crops this fall, but they\u2019ve got little idea of where all the supplies will go. China, historically the biggest buyer of US soybeans, hasn\u2019t inked a deal for a single cargo from this year\u2019s harvest, which starts next month. Blowback from President Donald Trump\u2019s trade war has served to further chill the administration\u2019s already icy relationship with the Asian country.<\/p>\n Since then, Reuters reports<\/a>, Chinese buyers finally did book some U.S. soybeans, but sales volumes remain billions of dollars short of where they were just last year.<\/p>\n Readers of Capitolism will surely recall that China turned away from U.S. soy during Trump\u2019s first term, but the trend has accelerated since Trump returned to office. Bloomberg adds<\/a> elsewhere, in fact, that Chinese purchasers are building a historically large stockpile of non-U.S. beans\u2014Chinese and mainly Brazilian imports\u2014to be \u201cbetter prepared\u201d for a winter with few U.S. soybeans. The result would be devastating for American farmers who have plowed (pun!) into the crop in recent years.<\/p>\n Farmers\u2019 trade problems aren\u2019t, however, just about soybean exports. News reports show, for example, that U.S. exporters of alfalfa<\/a>, beef and pork<\/a>, almonds<\/a>, dairy, cotton, sorghum, and other products have all taken hits<\/a> since Trump\u2019s tariff mayhem began in February. Exports to China are typically the biggest losses in these cases, too, but other nations are also turning away from American agriculture<\/a>. Overall, the USDA in May projected softening exports and a widening \u201cagricultural trade deficit\u201d due to tariffs and trade tensions. (The latest report showed exports remaining basically flat for 2025-26 but\u2014in cringeworthy fashion\u2014avoided controversy<\/a> by simply removing the commentary section entirely.)\u00a0<\/p>\n Another trade policy problem is that the U.S. has effectively given up on broad, comprehensive free trade agreements that typically boost U.S. farm exports. Commenting on USDA\u2019s projections, for example, the American Farm Bureau explained<\/a> that \u201cforeign buyers are turning to lower-cost suppliers like Brazil and Argentina,\u201d and that the United States thus needs \u201cto pursue new trade agreements and strengthen existing ones to expand export opportunities.\u201d The CEO of the National Corn Growers Association put it even more bluntly<\/a>: \u201cThe United States hasn’t secured a new trade deal with a major partner in over a decade.\u201d<\/p>\n As the Farm Bureau statement indicates, foreign competition in important markets abroad is indeed a big challenge for American farmers\u2014-and Brazil looms large in this respect, with ever-escalating exports as U.S. sales abroad stagnate<\/a>:<\/p>\n The other big problem is U.S. subsidies and renewable fuel mandates that encourage the overproduction of certain crops, especially corn and soy. As we\u2019ve discussed<\/a> repeatedly<\/a>, U.S. farm payments have long encouraged farmers to grow certain products (corn, dairy, etc.) that get extra-special government treatment, thus resulting in periodic gluts when state-encouraged supply outstrips demand. As my Cato colleague Paul Best documented<\/a> in 2024, government crop insurance<\/a> is particularly bad in this regard, with one Iowa farmer estimating that the \u201cvast majority\u201d of all U.S. planting decisions depend on \u201chow much money is guaranteed through subsidized crop insurance,\u201d thus creating a highly centralized production system:<\/p>\n \u201cGovernment would like farmers to grow certain commodities, the big players\u2014corn, wheat, soybeans,\u201d [Iowa farmer Gabe] Brown said. \u201cBy offering those incentives, the farmer\u2019s going to go, \u2018Well, I can make the most money planting corn, because I\u2019m guaranteed this amount of money.\u2019 Farmers know as long as they keep their expenses below that payment price, they\u2019re going to make money, so it incentivizes farmers to plant those monocultures year after year.\u201d<\/p>\n Combined with the fact that insurance for \u201cspecialty crops\u201d (mainly fruits and vegetables) is limited and complicated, the system traps farmers into \u201cgrowing the same few crops or livestock because they are the only options for which good insurance is available.\u201d As a result, around 80 percent of all insurance premium subsidies flow to just corn, soybeans, wheat, and cotton:<\/p>\n And just 10 percent of all acreage covered by federally subsidized insurance goes to specialty crops:<\/p>\n Subsidized crop insurance also encourages farmers to keep using the same land and farming techniques and keep growing the same crops long after market conditions\u2014losses, weather, etc.\u2014would have told them to change things up. As Bloomberg documents,<\/a> for example, “A farmer caught growing different crops between rows or terminating their cover crops too late \u2026 is at risk of having their insurance claims denied.” ProPublica adds<\/a> that farmers in \u201csome of the most flood- and drought-prone parts of the country\u201d stay on land that is no longer productive because government payouts discourage leaving.<\/p>\n Renewable fuel policy distorts U.S. agricultural production even more. As the Journal just documented<\/a>, in fact, today\u2019s U.S. \u201cfarm economy relies heavily on government requirements for a certain amount of its crops to be blended into fuel: corn into ethanol and soybean oil into diesel.\u201d And faced with declining export sales, American farmers now \u201cworry that the government\u2019s fuel mandates won\u2019t keep pace with their expanding harvests.\u201d Here\u2019s the telling chart:<\/p>\n When, as the National Corn Growers Association\u2019s CEO just admitted<\/a>, policy has turned ethanol sales into the \u201clifeblood\u201d of American corn growers, you know you have a problem.<\/p>\n \nMore of the Same\n<\/p>\n So, federal policy\u2014subsidies, mandates, trade wars, etc.\u2014pushes American farmers\u2019 crop prices down, and federal policy\u2014tariffs, immigration restrictions, etc.\u2014pushes their production costs up. Combine those things with market factors (a big harvest, interest rates, etc.), and the result is an utterly foreseeable \u201ccrisis\u201d of the government\u2019s own making, with costs now far outstripping prices:<\/p>\n \u2026 and the much-watched fertilizer\/price ratio surging to pandemic-era highs:<\/p>\n As U.S. farmers cut their spending, moreover, other companies in the agriculture ecosystem\u2014including poor ol\u2019 John Deere<\/a>\u2014are suffering too<\/a>.<\/p>\n Unfortunately, these common problems are causing no one in Washington to reconsider U.S. trade and agricultural policy. Instead, decades of government support have farmers turning right back to the government for more of the same. One recent local news headline summarized the situation<\/a> depressingly well: \u201cHundreds of struggling Arkansas farmers ask federal government to save them.\u201d<\/p>\n Both Congress and the Trump administration, meanwhile, appear ready to oblige\u2014beyond the billions they just spent. As my colleague Tad DeHaven and I chronicled<\/a> in July, for example, the Trump administration is using federal biofuels policy to juice U.S. soybean demand and block competition from cleaner, cheaper used cooking oil from abroad. Big Corn is now lobbying<\/a> Trump for an expanded ethanol mandate to achieve a similar windfall, and, the Journal reports<\/a>, \u201cTrump administration officials and lawmakers have been considering another bailout for farmers this year.\u201d With Iowa a critical battleground<\/a> for Senate control in 2026, it’s safe money that American farmers will get their wish\u2014at taxpayers\u2019 expense.<\/p>\n It would also be at the expense of the longer-term health of the broken U.S. ag economy. As DeHaven and I explained, the biofuels payoff was \u201cthe continuation of a predictable cycle: the government causes a problem that it thinks it must solve.\u201d But instead of enacting sensible trade, immigration, and other reforms that lower farmers\u2019 costs, open markets, and let world-beating U.S. agricultural productivity<\/a> do its thing, \u201cPoliticians simply shift funds around to obscure their damaging policies, erecting a system of dependence and favoritism in the process.\u201d And, of course, Tariff Man has no intention of stopping any time soon\u2014even if the Supreme Court takes away<\/a> one of his favorite toys.<\/p>\n Maybe Washington will be ready for a change when the next farm crisis arrives, but I won\u2019t be holding my breath.<\/p>\n \nChart(s) of the Week\n<\/p>\n Recession indicators are gaining steam<\/a><\/p>\n Blue collar jobs \u2026 not so great right now<\/a><\/p>\n Imports to the rescue, again: \u201ca national cattle shortfall in the last few years has seen the U.S. become more reliant on imports to contain beef prices\u201d<\/a><\/p>\n \nThe Links\n<\/p>\n I\u2019m in The Atlantic talking about \u201cPeronism on the Potomac\u201d<\/a><\/p>\n Good primer on the economics of immigration<\/a><\/p>\n Actually, U.S. billionaires pay pretty high taxes<\/a><\/p>\n Cigarette taxes doing their thing<\/a><\/p>\n White House punts the economic boom to next year<\/a><\/p>\n Reduced immigration is now a big drag on U.S. growth<\/a><\/p>\n Almost all tariff revenue is from executive action<\/a><\/p>\n Tariffs are also a big drag on growth<\/a><\/p>\n India is still buying Russian oil<\/a><\/p>\n Automakers passing on tariffs without raising prices<\/a><\/p>\n This zombie U.S. Steel plant is a good example of the equity stake problem<\/a><\/p>\n U.S. migrant raid stirs Korean investor anxiety<\/a><\/p>\n Immigration enforcement causes Hispanic consumers to spend less<\/a><\/p>\n Tariffs raising U.S. health care prices<\/a><\/p>\n Tax-free tips is gonna be a gaming bonanza<\/a><\/p>\n 3D-printed homes in Houston<\/a><\/p>\n Regulatory compliance is a silent tax<\/a><\/p>\n Costly U.S. tariff red tape (and customs enforcement)<\/a><\/p>\n![\"image1\"](\"https:\/\/www.newsbeep.com\/ca\/wp-content\/uploads\/2025\/09\/image1.jpg\")
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