The U.S. agricultural sector is facing a dual challenge in 2025: a record-setting trade deficit and declining farmer confidence, both driven by mounting concerns over the outlook for agricultural exports, according to recent analyses from the American Farm Bureau Federation (AFBF) and Purdue University’s Ag Economy Barometer.
Record ag trade deficit
In a Market Intel report, Faith Parum, AFBF economist, wrote the U.S. is on pace to log the largest agricultural trade deficit in its history in 2025.
According to USDA’s Outlook for U.S. Agricultural Trade for May 2025, agricultural imports reached $78.2 billion between January and April, while exports totaled just $58.5 billion—a $19.7 billion shortfall in the first four months. Parum noted this marks the third consecutive year of agricultural trade deficits, following decades of consistent surpluses. The gap reached $16.7 billion in fiscal year 2023, nearly doubled to $31.8 billion in fiscal year 2024, and is now forecast to balloon to $49.5 billion in fiscal year 2025. If realized, this would be the largest agricultural trade imbalance in U.S. history.
AFBF noted that several structural issues are driving this trend. On the import side, American demand for high-value, consumer-ready products—such as fruits, vegetables, nuts, wine and alcohol—continues to climb. These horticultural products are expected to account for nearly half of total agricultural imports by value in fiscal year 2025. Many of these items are not produced in significant quantities domestically, reflecting U.S. consumers’ preferences for variety and year-round availability.
In contrast, AFBF said U.S. agricultural exports are heavily reliant on bulk commodities—such as grains and oilseeds—which generally command lower prices. Meanwhile, a strong U.S. dollar, elevated labor costs and logistical challenges have made American goods more expensive for international buyers.
Trade access has also been hindered by geopolitical tensions, retaliatory tariffs, and lingering trade disputes, particularly with major markets such as China and the European Union. Parum said foreign buyers are increasingly sourcing from countries like Brazil and Argentina, which can offer lower-cost alternatives.
AFBF emphasized the urgency of resolving trade conflicts and reinvigorating trade diplomacy. “Expanding export markets and ensuring fair trading conditions are critical to restoring balance,” the organization noted. Agreements such as a U.S.-U.K. trade deal could help diversify market access and stabilize export demand. However, AFBF stressed that trade policy must be rooted in science-based standards and long-term reliability to remain effective in a more competitive global landscape.
The mounting deficit, they warned, is more than a numbers game—it’s a clear signal that without stronger trade strategies, the financial health of U.S. agriculture is at risk.
Farmer sentiment slips
Farmer sentiment softened in June as growing uncertainty over trade policy and agricultural export potential began to weigh heavily on producers’ outlooks.
The Purdue University-CME Group Ag Economy Barometer dropped 12 points from 158 in May to 146, with the decline driven largely by an 18-point fall in the Index of Future Expectations. While sentiment remains significantly stronger than it was this time last year—up 41 points—experts at Purdue say the sharp divergence between current and future outlooks signals a deepening unease across the farm economy.
James Mintert, director of the Center for Commercial Agriculture, noted that the Current Conditions Index fell only slightly, by 2 points, to 144, leaving it 54 points above last year’s level. However, the steep drop in future expectations surprised many, including Purdue ag economist Michael Langemeier.
“We’ve been riding a wave since last August where future expectations outpaced current conditions,” Langemeier said. “Now they’re nearly identical, which we haven’t seen in quite some time.”
A key factor behind the shift, both agreed, is growing skepticism over the future of agricultural exports. In June, only 41% of farmers said they expect exports to increase over the next five years, a significant drop from 52% in May. According to Langemeier, the volatility in these export expectations “contributes mightily” to the drop in future sentiment.
Tariff concerns remain a part of that equation. Although fewer producers reported expecting a negative impact from tariffs in the May-June surveys compared to the March-April surveys—45% versus 56%— Mintert said the issue still looms large. Mintert pointed out that while positive sentiment ticked up slightly, many producers continue to view trade and tariff policy as a source of risk. Even so, a growing number now believe tariffs could be beneficial in the long term, with 63% in June saying they expect increased tariff use to strengthen the U.S. agricultural economy over time, down slightly from 70% in April and May.
The Farm Financial Performance Index also slipped in June, falling five points to 104. While still above 2024 levels, the decline aligns with the overall dip in optimism. Langemeier said that much of the relative strength in financial outlooks is credited to solid conditions in the beef sector, where record prices continue to support margins. Crop producers, however, face another challenging year. “2024 was not particularly great for crop producers, and 2025 is projected to be very similar,” Langemeier said.
The Farm Capital Investment Index rose five points to 60 in June, with 24% of producers saying it’s a good time to invest, twice the rate from a year ago. However, 54% plan to cut machinery purchases in 2025, up from 48% in May. Mintert noted optimism is rising, but spending remains cautious. Langemeier called it a “wait-and-see attitude,” as uncertainty around yields, prices and policy continues to deter significant investments despite improved current conditions.
As Mintert concluded, the volatility in attitudes toward exports, trade, and investment suggests the months ahead will be shaped as much by policy developments as by weather or commodity prices. — Charles Wallace, WLJ contributing editor
