The Trump administration is preparing to bail out American farmers hit by a perfect storm of rising costs and falling prices — even though federal policies predictably created the problem. As Cato’s Scott Lincicome told The New York Times, the situation is “a slow-motion trainwreck six years in the making.”
Tariffs Are Driving Up Costs
Farmers depend on stable and predictable production costs, but new tariffs have increased the cost of fertilizer, farm machinery, and other needed goods. Farmers have been “in a state of confusion since the tariff rollout,” reports Lincicome, and labor costs are up too because immigration raids have depleted the agricultural workforce.
Retaliation Is Driving Prices Down
Meanwhile, U.S. trade policy is driving crop prices down. China, “historically the biggest buyer of U.S. soybeans, hasn’t inked a deal for a single cargo from this year’s harvest,” reports Lincicome, while “foreign buyers are turning to lower-cost suppliers like Brazil and Argentina.” Less demand for U.S. farm products means lower prices for farmers – and higher storage costs for what they can’t sell.
Other Federal Policy Has Boxed Farmers In
Adding insult to injury, federal subsidy and biofuels policies have heightened the risks farmers are now facing. “The government would like farmers to grow certain commodities — corn, wheat, soybeans,” creating “a system of dependence and favoritism,” says Lincicome. Around 80 percent of all insurance premium subsidies flow to just corn, soybeans, wheat, and cotton, while ethanol sales remain the “lifeblood” of U.S. corn growers.
“Instead of diversifying to reduce trade and weather risks, Washington has trapped farmers in the very system that’s now collapsing around them,” Lincicome concludes. And instead of fixing the problems, “politicians simply shift funds around to obscure their damaging policies.” The forthcoming bailouts follow the same gameplan.
You can read more from Lincicome on this topic here: https://www.cato.org/commentary/americas-latest-farmer-crisis-government-grown
To reach Lincicome, please feel free to contact Emily Salamon at esalamon@cato.org
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