Tariffs fuel uncertainty in global markets

While U.S. corn exports are on track for a record year and beef prices remain at a record high, Great Plains producers are feeling the pressure from another angle. Tariffs may not be slowing grain shipments abroad, but they are quietly inflating production costs and shifting trade relationships in ways that could reshape American agriculture in the years ahead.

Michael Dibbern, president of the Nebraska Corn Growers Association and a fourth-generation farmer, said input costs have become one of the biggest concerns for corn growers like him.

“Interestingly enough, we can’t really say that tariffs have affected exports because we’re actually on pace to have a record year for exports of raw corn and ethanol, which takes up about 30 to 40 percent of our nation’s corn crop each year,” he said.

Dibbern and his family grow mostly corn in eastern Nebraska, but also raise soybeans, alfalfa and cattle. Despite historically low corn prices, demand from countries like Mexico and Canada has helped boost export volume.

“Mexico and Canada have been just excellent trading partners in the absence of China,” Dibbern said. “Mainly in the corn world. Mexico has taken more corn from us in the last year or two than they ever have.”

As China has shifted its corn and soybean purchases to Brazil, Mexico, a previous Brazilian buyer has turned to the United States.

“Mexico used to get corn and soybeans from Brazil, but now that China has kind of taken over that market, Mexico has turned to us,” Dibbern said. “We’re very happy with that trade relationship.”

INPUT COSTS

However, the value of exports is not keeping up with rising production costs. Fertilizers and chemicals, many of which are imported, have become significantly more expensive. Dibbern said tariffs may be playing a role.

“Where tariffs could be hurting is a factor for our input costs,” he said. “A lot of our main inputs such as fertilizers and chemicals are actually produced outside of our borders, so every year we have to import a good chunk of those.”

Many of those inputs come from China, Russia and countries in the Middle East.

“We all know how our relations are with those three areas of the world right now, so a lot of that isn’t helping the situation,” Dibbern said.

Farmers in the Great Plains often lock in fertilizer and chemical contracts in the fall for the upcoming crop season. That timing puts added pressure on decision-making during a volatile market.

“This time of year is when we’re starting to get our prices and opportunities to book chemicals and fertilizers for next year’s crop,” Dibbern said. “I think some of the first numbers we’ve seen are not quite double the price that it was last year. I would say anywhere from 50 to 75 percent higher prices this year on most fertilizers.”

With corn prices low and input prices rising, farmers are weighing whether to commit to prices now or wait in hopes of relief.

“A lot of tough decisions will have to be made in the next four to six months, before we put our next crop in the ground,” Dibbern said.

Soybeans could provide a cost-saving option, as they require fewer chemical inputs.

“For example, soybeans don’t need any nitrogen fertilizers, because they’re a plant that can make their own,” Dibbern said. “So there can be some fertilizer savings there if you plant soybeans, if you’re willing to take the risk of lower price compared to corn. It will be interesting to see the dynamic come spring planting season.”

That shift could change how land is used across the Great Plains, by ranchers diversifying into the cattle industry to support the potential loss in row crop profitability.

“It’s been kind of a wake-up call taking into account the cattle market,” Dibbern said. “The feeder cattle market has been very, very profitable the last year, which is great. But I think we could see a greater diversification of agriculture going forward.”

CATTLE MARKET

Feeder cattle prices have continued to reach record highs heading into the fall. Erin Borror, vice president of economic analysis for the U.S. Meat Export Federation, said tight live cattle supplies in the U.S. and a closed border with Mexico due to new world screwworm have played a role.

“It’s hard to fully explain what’s happening on the world trade side if you’re just looking at high cattle prices,” Borror said. “In reality we’re leaving money on the table without this China market.”

Borror said tariffs imposed on China have been met with significant retaliation, particularly affecting beef exports. The U.S. beef industry has lost access to China, one of its largest export markets.

“The only retaliation is from China; unfortunately that has been significant,” she said.

Borror estimates the loss of the China market costs U.S. beef producers between $150 and $200 per head, or around $4 billion each year.

“Our top importer into this country now has a 76.4 percent tariff, and we lost one of our top export markets,” she said. “The most significant impact has been on beef because it’s in both directions.”

She warned that packers, already facing record-high processing costs, could lose more ground if market access does not improve.

“The packer has record high cost of production and has lost export markets to sell their product as well,” Borror said. “We need to rebuild this beef industry, and when that happens, we do not want a situation where we have packing plants close. Then we’re in a bad leverage position for the producer.”

The pork industry also relies heavily on China, particularly for variety meats such as feet, heads and stomachs.

“China pays a premium for these products and takes tremendous volumes,” Borror said. “They are our dominant market and top customer for pork variety meats, and there is no replacement.”

While some pork products still reach China with a 56 percent tariff, Borror said the situation could worsen. China has threatened to reinstate a 30 percent tariff on U.S. pork that was lifted in 2020. Combined, that would result in tariffs as high as 87 percent.

“Eighty-seven percent tariffs on our pork to China would just eliminate profitability and take the margin out of the business,” she said.

Tariffs that high have not been seen in recent history. The long-term implications depend on whether they remain in place.

“It’s not clear yet if the sweeping tariffs will be upheld, so it’s too early to guess the long-term effects,” Borror said. “But in general, sustained lasting tariffs will give a higher cost structure to the consumer.”

Despite ongoing export activity, both Borror and Dibbern agree that the global trade environment is becoming more fragile.

“We benefit in the U.S. being able to export to maximize the value of each animal, by shipping the products that are less desired by American consumers, but also import to be able to meet their demand for ground beef in particular,” Borror said. “It’s a delicate cycle.”

For now, Great Plains producers are navigating that cycle with caution, watching prices and policy as they prepare for another uncertain season.