What tariffs will mean for Colorado’s agriculture industry

With the looming possibility of tariff-sparked trade wars with the nation’s top-three trading partners, Colorado’s agriculture industry is bracing for a storm.

Twenty-five percent tariffs began to hit domestic importers of products from Canada and Mexico this week. Trump also doubled the tariff on all Chinese imports to 20% from 10% following an original tariff placed on Chinese imports that went into effect in early February. China quickly retaliated with 10 to 15% tariffs on a range of U.S. goods.

As agriculture producers in Colorado import and export a fair amount of products from and to all three countries, many of them are concerned that their already slender bottom lines may wither into negative territory. The common theme: uncertainty.

“We oppose tariffs that negatively impact family agriculture,” says Chad Franke, president of the Rocky Mountain Farmers Union (RMFU), a membership organization of 20,000 family farms in Colorado, New Mexico and Wyoming.

“Before (tariffs on imports from Mexico and Canada) actually took effect, they negotiated and pushed it back,” he said. “Nothing actually happened as far as actual implementation, but the uncertainty around that scares a lot of farmers.”

Numerous key agricultural inputs, including potash and other fertilizers, are largely sourced from Canada, and both Canada and Mexico are key markets for many of the state’s leading agricultural products.

“They’re very intertwined economies between the three countries,” said Franke. “When you start saying, ‘We’re going to put a 25% tariff on products coming into the United States,’ then Mexico and Canada are probably going to say, ‘Well, maybe we should put tariffs going the other way, too,” and that will hurt farmers on both sides. The inputs coming in are going to cost more, and the stuff going out is going to bring less money because they’re paying into a tariff situation.”

The federal Office of the U.S. Trade Representative estimated that Colorado exported $2.2 billion in domestic agricultural exports abroad in 2022. The state’s top agricultural exports included beef and veal ($606 million), other plant products ($297 million), dairy products ($226 million), wheat ($209 million) and feeds and other feed grains ($189 million), per U.S. Department of Agriculture (USDA) data.

Franke points to wheat, sunflowers and millet as Colorado crops that could be disproportionately impacted.

“Pretty much anything that our Colorado farmers and ranchers raise is probably going to be affected, because the commodity markets are really worldwide now,” he said. “The price that farmers get for wheat in eastern Colorado is not substantially different than the price of wheat across the country. If the commodity markets go down, that’s going to affect Colorado farmers as well as the rest of the country.

“The world produces a certain amount of each crop, and the trick is that the U.S. normally sells into premium markets,” Franke explained. “When tariffs go into place and those premium markets no longer can financially justify more expensive products, they start buying from Brazil or Argentina. Then the U.S. wheat goes to secondary markets at a lower price.”

Felicia and Stephanie Ohnmacht run Whiskey Sisters Supply, which markets grain from their own family farm in Burlington and other producers to craft distillers. While the Ohnmacht sisters don’t export to foreign distilleries, they say trade wars could have a big effect on their bottom line.

“We have to sit in the unknown and be comfortable in that until we start to see what’s going to happen,” said Felicia Ohnmacht, noting that commodity speculators are averse to uncertainty. “If the administration is doing something that makes them nervous, people start selling.”

On the input side, fertilizer prices skyrocketed by about 300% during the early days of the Russian invasion of Ukraine, she added.

“The one thing I didn’t realize when I started managing the farm was how much global politics affects my little 2,200 acres; it’s pretty crazy.”

“Farmers are a pawn in these larger, global negotiations,” echoed Stephanie Ohnmacht, noting that Brazil is well-positioned to fill demand in the face of retaliatory tariffs against the U.S. “That’s the hard part.”

Marc Arnusch, a third-generation farmer and owner of Arnusch Farms in Keenesburg, said Colorado producers saw some benefits from “saber-rattling” with tariffs during the previous Trump presidency, pointing to the first phase of the U.S-China Economic and Trade Agreement.

“It really helped us in Colorado export a lot of meat, a lot of wheat and, to a lesser extent, corn and milo,” he said. “It feels like we could really win in Colorado if China would open up their borders to more imports of milo, sorghum, millet, red meat and potentially some dairy. I think Colorado growers would definitely win in that kind of situation.”

There’s a bit of concern such a win would be tempered by losses elsewhere. Arnusch said close to half of his crops go to foreign markets, so trade wars could cut into his farm gate revenue (the market value of a product minus the selling costs), especially if there are roadblocks to trade with Mexico.

“A big part of our barley crop can make its way into beers like Corona or Modelo,” he said. “I’d hate to see a market as close as Mexico is to us disappear because of trade wars and tariffs.”

On the input side, costs for packaging materials from China have already risen by about 50% in the last five years, said Arnusch, but he sees a bigger potential profit-busters on the horizon. “Post-COVID, we had a hard time accessing a lot of chemistries for crop protection, so often we turn to generics, and the overwhelming majority of those generic chemistries come out of China,” he said. “That’s an area that we really can’t afford to see any more increases on. Our budgets are pretty tight as it is already. Even if we took a 10 or 15% increase in some of those crop protection products, that could erode any kind of margin we have.”

John Harold, founder of Tuxedo Corn Co., has raised sweet corn as well as onions and cattle in Olathe for more than 40 years. He also started farming sweet corn and melons in Sonora, Mexico, in the 1990s, and his son runs the operation today.

“For some reason, the two fools in Washington have convinced an awful lot of people that somehow those governments are going to pay those tariffs and not the U.S. consumer,” said Harold of the tariff situation.

The nature of commodity markets means that a tariff’s impact on prices would be widespread, regardless of how much a producer exports.

“If tariffs went on beef, then everybody raising beef would feel the effects,” Harold said. “The biggest problem is the retaliatory tariffs could affect the cattle market dramatically.”

With tariffs on Mexican imports, Harold worries it could render his Sonora farm economically unviable.

“… that will affect my operation in Mexico dramatically, because I won’t be able to compete.”

It’s not only Harold’s business in Mexico that’s vulnerable.

“The little valley that I went to 30-some-odd years ago, when I first went there, they were cultivating with mules, and now Costco and all kinds of United States companies are down there,” he said. “We’re American companies that have invested down here, and you’re going to put us out of business because of your temper tantrum.”

What can farmers and ranchers do to deflect the chaos? “Sooner or later, I think producers in Colorado and all over the country are going to have to say to their elected representatives, ‘You guys have got to stand up,’” said Harold.

The RMFU’s Franke references an old Will Rogers quote: “The farmer has to be an optimist or he wouldn’t still be a farmer.”

“In the best of times, agriculture is an uncertain thing,” Franke said. “You don’t know if it’s going to rain. You don’t know if it’s going to hail. You don’t know if it’s going to rain too much or not enough. You don’t know what the markets are going to be when you plant wheat in September that you’re not harvesting until June or July of the next year.”

The tariff situation adds yet another layer of uncertainty, and there’s a real human toll.

“It is a tough time mentally to be a farmer,” Franke said. “The suicide rate among farmers is three times the average in the U.S., and situations like this don’t make it any better.”