Farmland Values: Tariffs Will Not Be the Only Factor

An ever-changing, unpredictable trade war, jittering financial markets, and recession fears have many people wondering what it will mean for farmland values and agriculture producers. 

“It is no secret that U.S. agriculture is being used as a bargaining chip in ongoing tariff negotiations,” wrote Peoples Company President Steve Bruere and University of Illinois Agricultural & Consumer Economics Instructor Ailie Elmore in a joint white paper about the ongoing situation.

The authors cited President Donald Trump’s trade policy that has “brought about a multitude of economic uncertainty as tariff news has dominated headlines” since he returned to the White House.

RELATED: Peoples Company President Steve Bruere reveals what it takes to bring in the headliners for the annual Land Investment Expo in Des Moines, Iowa.

President Trump’s Tariff Focus on China

China has been one of Trump’s primary opponents when it comes to his trade war on foreign producers. Trump’s Trade War 2.0 is much more substantial than the one he initiated during his first term in office. But one result has been consistent: China has responded with higher tariffs on American soybeans.

Export markets are vital to bean producers in the United States, since they grow more than domestic consumers will buy (regardless of whether the beans become food or fuel). More than half of American soybeans are exported.

The authors point out that Trump’s first tariff fight with China resulted in that country enforcing a 25% tariff on American soybeans. Brazil benefited as a soybean alternative at the expense of American producers.

Other Factors Besides Tariffs Will Impact Farmland Values

While Trump’s tariffs could again depress American export potential, they may also get an outsized share of investor attention. “Like a dividend-paying stock, farmland’s total return is derived from both asset appreciation and the income it generates. Historically, a larger share of the return has come from land value appreciation rather than annual income,” the authors wrote.

Financial markets have been jarred with the chaotic nature of Trump’s on again, off again threats and adjustments in his tariff strategy. But the authors believe that farmland “is fundamentally different from highly liquid debt and equity markets. As a more liquid and slow-moving asset, farmland tends to adjust gradually over time. They reality is that no one can predict with certainty how tariffs will ultimately affect the market,” they concluded.

Farmland’s strength has been its ability to generate future income. “In crop production agriculture, this income comes from producing some of the world’s most strategic resources: food, fiber, and fuel,” the authors wrote. “The long-term promise of U.S. agriculture remains strong, fueled by rising global demand for these essential resources, especially from rapidly growing populations in developing countries.”

RELATED: Read the full “Softening, Not Crashing: Why the Next Farmland Cycle Won’t Be Defined by Tariffs Alone” white paper containing historical lessons that demonstrate farmland’s strengths despite challenging forces.