Dr. Bruce Sherrick: Trade War Could Leave Lasting Scars on U.S. Farmland Markets
Listen and Subscribe on YouTube
The long-term impact of President Donald Trump’s global trade war on American farmland may be difficult to measure. Perhaps Americans end up with new deals that bring additional economic prosperity. Perhaps the chaotic nature of the policies hurt agricultural producers by reducing or eliminating previous export possibilities.
Some markets will return. Others may not. And for farmland owners and investors, the consequences could extend well beyond the immediate effects on commodity prices and farm income.
“Some damage has been done,” said Dr. Bruce Sherrick, director of the TIAA Center for Farmland Research and Fruin Professor in Land Economics at the University of Illinois Urbana-Champaign.
He repeated for emphasis, “I'm not sure an easy way to say…some damage has been done.”
Sherrick compared the uncertainty to the long-term health consequences of smoking, even after someone quits.
“Some damage was done. We may not be able to detect it,” he said.
Dr. Bruce Sherrick bio:
TIAA Center for Farmland Research – Director
Fruin Family Professor of Farmland Economics – University of Illinois at Urbana-Champaign
Leading Harvest – Board Member
How Does Trade Policy Uncertainty Affect Farmland Value?
Uncertainty from frequently changing U.S. federal trade policy presents a challenge for landowners trying to evaluate the long-term earning potential of their farms. Agricultural trade relationships influence where American crops are sold, how much buyers are willing to pay, and whether competing countries gain opportunities to expand their market share.
Even when trade agreements are reached, Sherrick said, restoring the relationships that existed before a trade dispute may not be straightforward.
“Trade deals that work best tend to be essentially, you know, no tariffs either direction or agreements in advance,” he said.
Long-term purchase agreements can provide farmers and agricultural businesses with greater certainty, Sherrick said. In effect, guaranteed demand can help offset the uncertainty created by trade barriers.
Trade deals on farmers and ranchers
But uncertainty itself has a cost. When producers cannot confidently forecast demand, prices or access to export markets, they may become more cautious about investing in equipment, technology, and other improvements that increase productivity.
For farmland investors, that raises an important question: How much of a property's long-term value depends on markets that may never fully return to their previous condition?
Productivity remains America's advantage
Sherrick believes the fundamental competitive advantages of American agriculture remain intact. The United States has productive farmland, established infrastructure, and a strong agricultural technology sector. But maintaining those advantages requires continued improvement in the efficiency of production.
“We grow 250-bushel corn now on land that when I was a kid would have been 125, right?” Sherrick said.
That increase in productivity illustrates why he believes technological progress can help American agriculture withstand market disruptions.
Why Does American Farm Productivity Matter to Landowners?
“If you can keep expanding productivity, that's the way you win that question. And it makes the small historic perturbations in that system less relevant,” he said.
Higher yields can help producers remain competitive even when prices weaken or export markets shift. Advances in seed genetics, fertilizer efficiency, water management, and pest control can all influence how much it costs to produce a bushel of corn or soybeans.
Those improvements matter to farmland owners because productivity helps determine a farm's income potential and its ability to withstand difficult economic conditions.
However, Sherrick cautioned that not every crop has the same potential for dramatic technological gains. Some commodities may have fewer opportunities for substantial yield increases, making them more vulnerable when trade disruptions or changing market conditions put pressure on prices.
“Those things determine who can do it cheapest, best, fastest,” he said, referring to the combination of fertility, water efficiency, pest control, and other production factors.
“That's what I'm worried about breaking,” Sherrick added.
RELATED: Dr. Bruce Sherrick shares new research that shows that China buying U.S. farmland may not be the threat that some believe.
Where Can American Crops Find New Markets?
Another part of the long-term equation is finding additional uses for agricultural commodities.
Sherrick pointed to biofuels and other energy applications as potential opportunities to expand demand for crops grown by American farmers.
Agriculture's ability to produce renewable, plant-based carbon offers a different pathway for meeting some energy needs than relying exclusively on fossil fuels.
Developing those markets could give farmers additional outlets for their production and reduce their dependence on traditional export destinations. But the potential benefits will depend on technology, production costs, energy prices, and whether new uses can compete economically with existing alternatives.
Sherrick also emphasized that global agricultural markets are shaped by economic forces that extend beyond government policy.
“I think markets are bigger than governments,” he said.
Over time, he believes markets will continue to favor efficient production and distribution. The United States retains an advantage in corn production, while Brazil is particularly competitive in soybeans. Other regions have their own advantages in producing specific agricultural commodities.
Trade disputes can change the pace of that competition, but they do not necessarily eliminate the underlying advantages of one region over another.
How trade policy affects landowners
For farmland owners and investors, the challenge is separating temporary market disruptions from changes that could permanently affect a property's earning power.
A farm's long-term value will continue to depend on its productivity, operating costs, access to markets, and the demand for what it produces. Trade policy is an important part of that equation, but it is not the only one.
Energy costs, fertilizer prices, seed technology, and the development of new uses for agricultural products could prove just as important in determining which regions and farms remain competitive.
Sherrick expects many trade-related disruptions to ease over time. But renewed trade flows do not ensure that all buyers will return or that all lost market share will be regained.
“They mostly heal, but you don't get rid of some scars,” he said.
