US agricultural producers maintain a resilient outlook about their business prospects despite the looming threat of a trade war, an industry survey shows.
According to the latest Purdue University-CME Group Ag Economy Barometer survey carried out in February 2025, farmer sentiment remains positive in both the short and the long term.
The Current Conditions Index improved on crop price recovery and growing expectations for higher disaster relief payments, reaching its highest reading since 2023.
Meanwhile, the Future Expectations Index also continued to rise above the Current, signalling farmers’ positive sentiment in the long run.
Producers are also upbeat on investment – the Farm Capital Investment Index rose to its most positive reading since 2021, gaining 4 points since November’s reading, taken just after the US presidential election.
Growth expectations are also rosier than last year, with more producers expecting their operations to grow at a fast rate (10-15% or more annually) in the year ahead. Meanwhile, the number of producers who have no growth plans or plan to exit or retire declined.
Trade policy worries
While farmer sentiment remained resilient month on month, worries about the US government’s trade policy plans grew.
More respondents chose ‘trade policy’ as the most important policy or program to their farm in the next 5 years (44% in February 2025 versus 40% in January), suggesting US farmers are closely aligned on the potential impacts of tariffs.
At the same time, policies linked to energy or the environment were of least importance.
Trade wins out against the climate
Nearly half (44%) of those asked which policy will be the most important to their farm in the next 5 years chose ‘trade’; followed by 18% for ‘crop insurance program’ and 13% for ‘interest rate policy’.
Policies related to energy (9%), the environment (7%), climate (6%) and conservation (4%) were deemed the least important with regards to business continuity.
A trade war that would result in a significant decrease in US agricultural exports is ‘likely’ or ‘very likely’ according to nearly half (47.3%) of those polled. Around a quarter could not say, and another 27.5% answered ‘unlikely’ or ‘very unlikely’.
Why are US farmers upbeat?
At a time when the US and some of its key trade allies mull plans to introduce tariffs on key agrifood commodities including dairy, some may question US producers’ positive sentiment.
But domestically, there are plenty of signs why farmers are staying cautiously optimistic at a time of growing global uncertainty.
According to the USDA Economic Research Service’s latest farm sector income forecast, farmer income is set to rise in 2025 while production costs are expected to decrease, boosting profitability.
Net farm income – a broad measure of profits – is set to increase by $41bn in 2025 in nominal terms, up almost 30% on last year to more than $180bn. Adjusted for inflation, the increase is still of more than 26% from 2024 and well above the 20-year average.
Farmers are also set to collect more financial aid from the government in the year ahead from various programs, particularly disaster relief and commodity payments.
The USDA expects to pay out more than $42bn worth of farm assistance in the year, an increase of $33bn from 2024; the estimate excludes loans and insurance indemnity payments.
Cash for losses due to natural disasters in 2023 and 2024 are forecast at $35.7bn, making it the single largest category of direct federal payments to be paid out in 2025.
Commodity payments are expected to triple in 2025 – increasing by more than $1.1bn, including more than $865m in ARC payments and close to $730m in PLC payments.
For dairy farmers, strong milk prices are likely to reduce the amount of payments made through the The Dairy Margin Coverage Program (DMC) in 2025.
DMC payments are expected to decrease by nearly $9m, with the USDA expecting to make $68m in total payments.
In gross income terms, cash receipts are forecast to decrease $1.8bn in 2025.
Milk receipts are expected to increase by $1.4bn (2.7%) nominally in 2025 to $52.2bn in total, due to higher prices and quantities sold.
Receipts from cattle and calves are expected to fall marginally by 0.2% over lower quantities sold.
Chicken eggs receipts are projected to decrease 2.2% ($600m) in 2025 over forecast decline in prices; and broiler receipts are projected to rise 3% to $1.4bn on higher prices and quantities sold.
Total animal/animal product cash receipts are forecast at $275.4bn in 2025, an increase of $3.8bn (1.4%) in nominal terms from 2024 but a decline when adjusted for inflation.
Combined receipts for corn and soybeans are forecast to fall $5.8bn, while vegetable and melon receipts and cotton receipts are expected to increase.
Key inputs decline – but labor costs to go up
Total production costs are set to drop marginally in 2025 – by 0.6% or $2.5bn on last year, the USDA estimates.
Feed expenses, the largest single expense category, are forecast at $69.4nn in 2024 and $62.4bn in 2025, falling to the lowest level in real terms since 2007.
Fertilizer costs are also set to drop another 11.1% ($3.6bn) to $29.2bn in 2025.
For pesticides, farmers are expected to spend 6% ($1.2bn) less in 2025, or $18.1bn in total.
In contrast, labor expenses (including non-cash employee compensation) are forecast to be a record high.
Labor costs are forecast to increase to $51.7bn in 2024 and to $53.5bn in 2025, a total increase of 9.5% since 2023.
In 2023, labor expenses came in at $48.8bn.
Recession fears
US farmer sentiment will be closely monitored in the coming months as producers begin to react to the US administration’s policy manoeuvres.
While president Donald Trump moved to pause tariffs on Mexico and Canada late last week, he pleaded with farmers to ‘bear’ with him as he seeks a way to boost the US economy.
But the president also stoked recession fears on Sunday by side-stepping a Fox News question whether the US could go into a recession this year.
“I hate to predict things like that,” he said. “There is a period of transition because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing.”
President Trump’s tariff announcement last week also caused global stock market volatility, which has persisted into this week.
