Can farmers survive tariffs? One word: Diversify
In America’s farm country, the fear is palpable. In recent months, I’ve talked to dairy farm owners in Wisconsin, grain and soy farmers in the Dakotas, and stockmen in California who worry that President Donald Trump’s tariff wars will trigger a new farm crisis. Many predict hard times to rival the epidemic of bankruptcies that devastated American farms in the 1980s.
The tariffs aren’t helping, it’s true. But Trump’s trade dispute is just the latest factor in a longer-term decline in farm income. Other pressures have been wearing down farmers’ reserves of capital, soil and patience for years. There’s the rising cost of energy, water and agrichemicals, for example, and a rash of climate disasters.
Yet the roots of the problem go even deeper—to the massive monocultures that dominate the American heartland.
Much of our nation’s agricultural land is devoted to two crops: corn and soybeans. Those endless fields of corn and soy are a marvel of modern agribusiness, but they are vulnerable to the vicissitudes of markets and Mother Nature. Think of it as a stock portfolio invested in just two companies.
When the prices of those crops fall on the global commodity markets, farmers take a big hit. The price of soybeans has fallen by more than half since 2012, from about $17 to $8 per bushel. Taxpayers are also on the hook: soy farmers will receive $3.6 billion—76 percent—of the $4.7 billion allocated for Trump’s farm bailout so far.
To sidestep a crisis of epic proportions, policymakers need to refrain from trying to prop up the status quo with more price supports and emergency relief. Instead, we should invest in a new model of agriculture: diversified farms that supply grains, dairy, meats and other produce to a variety of markets.
The good news is that this new model already exists. Today, innovative producers are working at several different scales of vegetable, fruit and meat production. They have found ways to reduce inputs, land debt and delivery costs to bring their direct-marketed foods to consumers for less than conventional farmers can do.
By 2015, 167,000 U.S. farms and ranches were direct-marketing fresh and value-added foods in their home regions. Those family-owned operations produce nearly $9 billion worth of diverse crops each year. And they are proving economically resilient: As USDA economist Nigel Key has found, “farms that market directly to consumers through farmstands, farmers markets or CSAs (community-supported agriculture) have higher business survival rates.”
How do they do it? Their operations typically have a more favorable asset-to-debt ratio because they purchase less machinery, use fewer costly agrichemicals, and have lower interest payments. Importantly, these farmers are focused on meeting the needs of their rural neighbors and nearby urban “green market” consumers, rather than on the distant— and fickle—foreign markets now involved in the tariff wars. They retail their fresh and value-added foods through more than 8,700 farmers markets and 7,400 CSAs across the U.S., returning more than three times their revenues in multiplier effects that ripple through and enrich their own communities.
In the last two decades, the number of farmers’ markets in the United States has grown nearly five-fold. What’s more, these farmers are building alliances with each other through marketing co-ops, and with consumers in nearby metro areas in ways that can heal the rural-urban divide.
Even if the tariff wars pass, American farmers remain vulnerable. Doubling down on commodity monocultures won’t help. To prevent the next crisis, we must nurture a new kind of agriculture: diversified farms that serve the needs of farmers and consumers alike.