The United States has become a major global agricultural producer and supplier thanks to its natural resources and favorable climate conditions. The country has historically been a world leader in agriculture, with abundant and diverse arable land, good access to human capital, and advanced machinery. As the world’s largest exporter of agricultural products, the United States exports around one-fifth of its national agricultural production. However, modern farming methods cannot eliminate agriculture’s risks and economic uncertainties, such as natural disasters, trade disputes, wars, soaring inflation, and unprecedented supply chain disruptions.
Agriculture in the United States
The United States, owing to its natural resources and land conditions, has become one of the world’s leading agricultural producers and suppliers. In 2021, the national contribution from the country’s farms was approximately $165 billion, equating to around 1% of the U.S. Gross Domestic Product (GDP). The sector employed nearly 877,000 people, the majority of whom were involved in tasks related to crops, nurseries, and greenhouses. By 2031, the number of employees in this sector is estimated to increase to 884,000. Over four decades, the area under cultivation has decreased by nearly 50 million acres, reaching 893.4 million in 2022. This has not reduced costs associated with farming activities but has resulted from technological advancements that have improved farm productivity (Statista). This means that the United States’ global leadership in agriculture depends on its natural resources and land conditions. In 2021, farms contributed $165 billion, equivalent to 1% of the U.S. Gross Domestic Product, and employed 877,000 people, particularly in crops, nurseries, and greenhouses. The sector is expected to grow to 884,000 people by 2031. However, the cultivated area decreased by approximately 50 million acres over four decades.
The United States Department of Agriculture
In 2012, the USDA celebrated its 150th anniversary, marking President Abraham Lincoln’s creation of the Department of Agriculture in 1862. Lincoln referred to the USDA two years later as “The People’s Department.” At that time, nearly half of the U.S. population lived on farms, compared to just 2 percent today. Despite this, the USDA is working on various issues, including food, agriculture, economic development, science, natural resource conservation, and other areas, to benefit all Americans daily (USDA).
U.S. Agricultural Production
In 2023, U.S. agricultural production reached $360.845 billion, mainly cereal crops. A significant portion of the country’s cultivated agricultural land is dedicated to corn, accounting for nearly three-quarters of national agricultural production. The high demand for corn is attributed to its substantial domestic consumption, exceeding 663 million metric tons annually. The United States is considered the world’s largest producer of this grain, with a volume close to 345 million metric tons in 2022. Other crops such as sugar, vegetables, and cotton, historically associated with slave plantations, also contribute to the industry, with 12.4 million tons of grain produced in 2023. According to economist Daniel Filipenco, during the 2023-2024 marketing year, the United States produced 389.7 million metric tons of corn, approximately one-third of the global total, making it the largest corn-producing country. The top three corn-producing countries are completed by China and Brazil (Filipenco). This means that the United States is the world’s largest corn producer, accounting for one-third of global production, followed by China and Brazil.
Foreign Trade
Foreign trade plays a significant role in U.S. agricultural production. However, in 2023, there was a decline in production, leading the primary sector to reduce its exports and forcing it to look more outward, resulting in a trade deficit expected to be greater in 2024. The increase in imports in 2023 caused a significant loss of dollars, exceeding $200 billion. In particular, avocados from Mexico, which are highly popular as guacamole, the preferred snack of American football fans, saw substantial imports. During the 2024 Super Bowl, the country received 130,000 metric tons of guacamole from the Mexican market. The European Union is one of the major trading partners of the United States in cereal consumption. Transactions originating from the Old Continent have seen a general increase since 2010, and the importance of U.S. agriculture in the diets of nations like Spain, France, and Italy is notable (Statista).
Inflation in the United States and Its Impact on Agriculture
Inflation affects American farmers in various ways, as they are both producers and consumers within their industry. They purchase inputs such as seeds, fertilizers, fuel, utilities, and equipment repairs. Rising prices lead to higher costs for these inputs, impacting their operations. Fertilizer prices have surged, with some farmers reporting a 300% increase in 2022 compared to the previous year. This leads to reduced input usage or a decrease in production practices. Inflationary pressures can also drive up raw material prices, which may partially offset the high cost of agricultural production. This cycle results in higher demand for agricultural inputs and less attractive exports, making U.S. exports less appealing to foreign consumers. Farming activities, such as land, are also revalued, with tenants most affected (Britwum). According to farmers in the Midwest (Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Ohio, Oklahoma, North Dakota, South Dakota, and Wisconsin), two different things happen in agriculture: economically, they get reasonable prices for the raw materials they grow, such as soybeans, wheat, and corn, which tend to fluctuate, but their operating costs have skyrocketed. For their crops, they need inputs for efficient irrigation, seeds, fertilizers, and chemicals, many of which are produced outside the United States. They claim that inflation has a direct impact on their farms. American farmers tend to vote Republican and support President Trump, even though the trade war with China harmed them. Their main challenges include rising energy and production costs, which they attribute to political policies. They expressed that they were energy independent three years ago, and President Biden closed the Keystone XL pipeline, which passed through these states. This caused energy costs to increase, leading to inflation, as they use diesel to plant their crops. If energy prices are high, it affects the end consumer, who pays 30%, 40%, or even 50% more for their food (D.W.).
Consequences of the U.S.-China Trade War and Its Impact on Agriculture
In March 2018, former U.S. President Donald Trump initiated a trade war between China and the United States. He imposed a $50 billion tariff on Chinese products under the Trade Act of 1974, citing a history of unfair trade practices, intellectual property infringement, and forced transfer of U.S. technology to China. In response, the Chinese government imposed tariffs on more than 128 U.S. products, including soybeans, one of the main exports to China. Trump has advocated for tariffs since 2018, aiming to reduce the U.S. trade deficit and promote domestic manufacturing. While some economists and politicians argue that the persistent U.S. trade deficit is problematic, others contend that tariffs are neither a problem nor a solution. The trade war has negatively impacted the economies of both countries, with the United States raising consumer prices and causing complications for farmers and manufacturers. In China, economic growth and manufacturing activity have slowed compared to previous decades (Ke).
The Russian Invasion of Ukraine and Its Impact on U.S. Agriculture
In absolute terms, the most significant impacts are on fertilizers, fuels, and feed, with rising feed costs mainly due to higher corn and other feed prices. The war resulted in further increases in oil and natural gas prices, contributing to additional rises in fertilizer costs. According to the International Food Policy Research Institute, Russia, one of the leading fertilizer producers, accounts for about 17% of global potash fertilizer and about 15% of global nitrogen fertilizer trade. Russia, Belarus, and Ukraine represent a quarter of the world’s fertilizer production, and Russian leaders have banned their exports due to sanctions. Russia is also responsible for about 14% of the global natural gas trade, a key component in fertilizer manufacturing. Due to the conflict, the country has drastically cut gas exports to several countries, affecting its nitrogen fertilizer production. This has also increased fertilizer costs, reducing its affordability for farmers (Westhoff, Whistance, et al.). Before the war began, Ukraine and Russia accounted for nearly 30% of the global wheat trade. However, the sudden war halted exports, and the country could not meet this goal. With limited wheat shipped from Russia and Ukraine, wheat prices soared near-record levels. From January to March 2022, wheat prices increased by approximately 62%, from an average price of $7 per bushel throughout 2021 to over $11 per bushel. The drop in wheat production led to a shortage of wheat supply, driving up food prices: wheat forms the basis of livestock feed. This increase in feed prices means more expensive dairy and meat products, as farmers are forced to pass costs on to consumers (Mulders).
Conclusion
While the United States has a robust agricultural sector with natural resources and excellent climatic conditions for its crops, the amount of farmland has significantly decreased over the last four decades due to technological advances to improve crop productivity. The USDA emphasizes partnerships with higher education institutions, such as universities, for groundbreaking research, education, and innovation in this field. These partnerships are vital for the U.S., as they can surpass the rest of the world in innovation, research, and development. For 150 years, USDA has supported U.S. economic prosperity by creating a “daily, in every sense” department, conserving natural resources, boosting agricultural exports, developing the rural economy, and helping Americans lead better lives. However, in 2023, the foreign trade of agricultural production experienced a decline due to rising production costs, reduced federal government support, and lower grain prices. Much of the pressure on income in the farm sector came from lower prices for raw materials sold, mainly corn and soybeans. Inflation also impacts U.S. agriculture, as farmers purchase inputs from third parties, such as seeds, fertilizers, fuels, utilities, and equipment repairs. Rising prices for these inputs affect production operations, leading to higher raw material prices, making exports less attractive to foreign consumers, and increasing the value of agricultural activities like land. The U.S.-China trade war has also affected American agriculture, with soybean production being the primary market impacted by the increased tariffs on this product imposed by China, leading to a drastic reduction in exports to this country while benefiting other countries like Brazil. The Russian invasion of Ukraine has significantly affected fertilizers, fuels, and feed, with Russia, Belarus, and Ukraine representing a third of the world’s fertilizer production. In this situation of economic uncertainties related to American agriculture, the country must rethink its strategy to continue being a global agricultural supplier. This includes innovating in agricultural production, improving productivity through the USDA to develop the rural economy, and increasing foreign trade of its agricultural production, which has declined since the trade war with China, causing an increase in consumer prices and complications for farmers and manufacturers. Finally, the United States should be the leading promoter of ending the Russia-Ukraine war, as this conflict has led to increased production costs for fertilizers, fuel, and feed, directly harming its agriculture.
ABOUT THE AUTHOR
Luis Henry Contreras Del Aguila
Food Industries Engineer Universidad Nacional Agraria de la Selva- Tingo Maria- Peru
Master in Agribusiness Administration ESAN University – Lima-Peru
Country Agribusiness CEO
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