Farmers are facing significant uncertainty, with 57% of farmers anticipating a negative impact from tariffs on their farm's income this year.
Purdue University Center for Commercial Agriculture director Michael Langemeier joins Catalysts host Madison Mills and Tematica Research chief investment officer Chris Versace to explain how these tariffs could squeeze farmers' margins by lowering prices.
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Just to get a sense, can you kind of operationalize for me how do tariffs impact farmers and how do they specifically impact their income?
Okay, let me talk a little bit about the producer sentiment index and then I'll get into the the question you have. Uh the producer sentiment index is is is is is derived from a monthly survey that takes place takes place mid month. Uh in October the index was 115. Uh in November the index jumped to 145 partially as a result of the election. Uh we reached a peak at 152 and now it's dropped off to 140 uh using the survey results from mid- March. And so and so that's where we're at. Um we we did see some reduction here from February to March and that's primarily due to policy uncertainty, specifically related to tart related to tariffs. Uh you asked the question about uh the negative impact, the negative the the 55%, think there's going to be a negative impact on their farm income because of the tariffs. That really takes it takes the form of reduced prices uh and higher costs. And so it really affects both of those. Uh you know, certainly when you have goods like uh soybeans and wheat that are heavily dependent on on on tariffs is probably going to see a reduction in in exports of those commodities. And so it's going to have a negative impact on the price. And then also uh there are so items that we import uh to produce crops and livestock and those those those input costs are going to increase as a result of the tariffs. And so and so as a result, uh you see a margin squeeze uh coming from both reduced prices and higher input costs.
And I know in the survey data, farmers are indicating that they're anticipating some sort of rebate or kind of sweetener that allows them to stomach the pain of tariffs. What if that doesn't come to fruition? What is that impact potentially going to be?
If that doesn't come to fruition in 2025, it's going to be a very rough year for net farm income, particularly for crop producers. Uh livestock producers, specifically beef producers, have pretty good domestic market right now. And so the prices are pretty strong in a lot of livestock commodities, but that's not true uh with corn, soybeans and wheat and cotton. Uh and so if if we don't get uh some some payments related to the tariffs and the tariffs actually do take place uh and and have and and stay in place for a while, you're going to see a rather large uh negative impact on on net farm income uh for crop producers.
Now, Michael, you just mentioned that these surveys conducted mid month, but here we are, you know, at the end of the month or the start of the new month. And today we will find out, you know, more about tariffs. So I guess my question is, that 27 billion that you mentioned, is there upside to that number that we should be thinking about?
The uh it's it's really uncertain right now. Uh and and so it's very difficult to come up with those estimates and it really depends on how how big the tariffs are and and how widespread those tariffs are, whether that 27 billion billion will be uh should be larger or whether it should be smaller.