With additional trade wars on the horizon for 2025, Ag America’s Senior Director of Institutional Business Curt Covington says producers need to prepare for impact, and that hope alone is not a strategy.
“If you hope that this is not going to affect your sector of agriculture, that’s a bad place to start. I always recommend in these situations. One is you want to stretch revenue figures. In other words, how low can your revenue go before you can’t cover all of your expenses for your farming operation, your living expenses, your debt payments, and any capital replacement costs that you might have in that business? So that revenue has to have the ability to cover all of those things. Otherwise you’re going backwards. And so stressing revenue is crucial. Second thing I would say is more likely than not, you’re going to have to defer any major purchases. Deferring major purchases of equipment or land purchases is probably something you want to think about now as opposed to waiting to see what the impact is. As bullet point number three here. I would say you probably want to make sure you have plenty of liquidity in your balance sheet. Liquidity, I mean, working capital, right. And we always talk about working capital being the first defense against price volatility and the possibility of tariffs, the possibility of price volatility for commodities. So building working capital is crucial as a safety net for that commodity price volatility.”
Covington says farmers are going to need to separate their needs from their wants.
“I would say now is the time to say, okay, what are the things we have to do? What equipment do we have to replace or have to have a major repair of and separate those from the ones that say, it would be nice if we could do this, but maybe we can divert until we better understand the implications of the tariffs.”
He adds the Trump administration is likely to roll out assistance for producers of commodities most impacted.
“You know, they subsidized farmers, they provided market facilitation payments. They’ll probably be targeted to certain commodities that are affected the most. The Trump administration did this last time, and I wouldn’t doubt that they will do it this time because the support of the community to the Trump administration is crucial.”
He says alongside producers, those most impacted by trade conflict are the rural communities around them.
“Historically, when you’ve seen these kind of things, there is an impact to those rural communities. And so how do you offset that? It’s a hard thing to do unless the state or the county or even the federal government steps in to help support those rural communities. While farmers get affected by this, it’s the rural communities that I think get affected the most.”
Ag America is the largest non-regulated agriculture real-estate lender in the United States.