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Dec 03, 2025
By Jacquie Holland and Scott Gerlt, PhD
Rising input costs for farmers has been an issue the Trump administration has made a policy priority as it advances through its first year – and with good reason. Soybean producers are staring down the barrel of a third year of negative market returns.
Soybean growers find themselves in a precarious position as the 2025 harvest season wraps up. When harvest began in September 2025, November futures prices were between 25% - 30% lower than at the same point in 2022. The lower revenue levels limit the amount of liquid assets farmers have available to pay off 2025 expenses this fall.
It’s not just the revenue side of the income statement where soybean farmers are being squeezed. Farmers are facing elevated prices for land, machinery, seeds, pesticides and fertilizers. According to USDA, farm production expenses are expected to reach $467.4 billion for 2025 – a $12 billion increase over 2024.
According to annual soybean cost of production reports published by USDA’s Economic Research Service (ERS), land (28%), machinery and repairs (28%), seeds (12%), pesticides (7%), and fertilizers (7%) are the most critical inputs for soybean production and account for 83% of a soybean operation’s annual expenses per planted acre.
The rising input costs mean farmers are paying more than ever to grow their crops, often at a loss. An ASA economic analysis projects soybean farmers will net an $89 per planted acre market loss on their 2025 crops.
Anticipated 2025 losses will mark a third consecutive year of market losses for U.S. soybean producers. USDA’s Economic Research Service (ERS) expects 2026 input costs to remain at elevated levels. Unless revenues increase significantly next year, this would squeeze farmgate profits for a fourth year, marking the longest stretch of substantial soybean production losses since ERS’s 1998 – 2002 reporting period.
Previous analysis from the American Soybean Association has focused on revenue threats and opportunities for soybean prices. This analysis explores the rates of input expense increases as well as the complex and global underlying factors pushing prices higher.
The COVID-19 pandemic kicked off an era of price turbulence in input markets which has not subsided over the past five years. Due to record prevented plant acreage in 2019, some input supplies were stockpiled and prices for some products dropped to record lows in 2020 due to the excess inventory as well as lackluster crop prices during the 2018-2019 trade war.
Some input production was scaled back ahead of the 2020 season to account for higher supplies and lower prices. But the one-two punch of pandemic supply chain issues and crop shortfalls pushed demand for inputs, therefore prices, higher ahead of the 2021 season.
Russia’s military invasion of Ukraine in early 2022 sent fertilizer prices to new highs due to war sanctions and infrastructure damage to two of the world’s largest grain and oilseed producers. Russia is the only country in the world that is a major exporter of all three macronutrients.
As trade routes readjusted to less efficient routes, South American crop production increased, global consumption of soybeans and soy products increased and further geopolitical disruptions popped up in the Middle East, fertilizer prices eased off 2022 highs but remained elevated beyond pre-pandemic levels.
While these issues have played a significant role in increasing input prices over the past five years, there are current factors at play leading to input cost “stickiness,” including trade policies, geopolitical considerations and regulatory costs.
The U.S. agricultural sector depends heavily on imported inputs, with average annual import values totaling approximately $33 billion. Elevated tariff rates on key inputs —particularly fertilizers and pesticides — have become a significant cost factor in farm production economics.
Tariff measures enacted under the International Emergency Economic Powers Act (IEEPA) materially altered input cost structures. These tariffs raised the effective cost of agricultural imports and contributed to a measurable contraction in fertilizer import volumes, exerting upward pressure on domestic prices, especially within the phosphate segment. Executive Order 14257, signed on November 14, removed tariff duties from diammonium and monoammonium phosphates (DAP and MAP) and potassium chloride (potash), which may improve these specific input costs for the next growing season.
Data from the North Dakota State University Agricultural Trade Monitor indicates that the average tariff rate on agricultural input products has increased to 9.4%, compared with less than 1% prior to the implementation of the IEEPA tariffs. The most pronounced effects have been observed in pesticide imports, where effective tariff rates — including most-favored-nation adjustments — now average around 16% for herbicides, up from 5–6% previously. Specialized pesticide imports from India, a major global supplier, currently face an effective tariff rate approaching 44%.
Similarly, tractors have gone from a 0% tariff rate to a 16% tariff rate. An imported tractor with a value of $500,000 now faces an $80,000 duty to enter the country.
Although fertilizer tariffs remain comparatively lower due to exemptions from the IEEPA tariffs, import volumes have nonetheless declined. According to The Fertilizer Institute, U.S. fertilizer import volumes through August of 2025 were down 32% year-over-year for phosphates and 6% for potash.
Additional trade and production constraints have amplified these pressures. Countervailing duties on Moroccan phosphate imports — the largest global source — along with reductions in U.S. domestic fertilizer output, have further tightened supply. China is the second-largest phosphate processor but has been exporting less product over the past several years. The resulting supply chain realignment continues to reinforce elevated input costs across the U.S. agricultural sector.
U.S. agricultural production remains structurally dependent on consistent access to global input markets. Roughly 35% of the nitrogen, phosphorus and potassium (NPK) fertilizers used by U.S. farmers are imported, and approximately half of all active pesticide ingredients are manufactured abroad. This reliance on international supply chains exposes U.S. producers to geopolitical and trade-related risks that can materially influence input availability and pricing.
Because fertilizers are traded in an integrated global market, domestic price trends are influenced not only by U.S. agricultural conditions but also by shifts in global crop production and input demand. Increases in planting activity or yield expectations in other major producing regions can elevate global fertilizer prices, even in years when U.S. demand remains stable.
The United States ranks as the world’s fourth-largest fertilizer consumer, meaning international market forces often outweigh domestic conditions in determining price direction. Moreover, fertilizer production is highly resource- and energy-intensive and geographically concentrated in a limited number of regions.
When trade barriers — such as tariffs or countervailing duties — disrupt access to low-cost suppliers, sourcing must shift to higher-cost or logistically inefficient routes. These added duties, transport costs and risk premiums collectively compress U.S. farm profit margins.
Global acreage adjustments also play a key role in shaping input demand and pricing. Changes in crop composition alter nutrient requirements, which in turn affect fertilizer trade flows and price volatility.
For example, in 2025 U.S. soybean acreage declined by 6 million acres while corn acreage expanded by 8 million acres, increasing domestic fertilizer demand and contributing to higher prices. Looking ahead, Brazil — the world’s leading soybean exporter — is projected to expand soybean area by 4 million acres and corn area by 2 million acres for the 2025–2026 growing season. Such acreage shifts are likely to sustain firm global fertilizer demand and continue exerting upward pressure on input costs.
The cost and duration of bringing new agricultural technologies—particularly pesticides and biotechnology traits—to market have increased notably over the past decade. These rising development and compliance costs are coupled with expanding post-market legal exposure, reflecting both the complexity of the U.S. regulatory environment and the growing frequency of litigation targeting agricultural innovations.
Industry data indicates that the development of a new pesticidal product now requires an average of 12.3 years and $301 million from discovery through registration, based on 2019 benchmarks. This represents an 8.8% increase in development time and a 5.7% increase in cost compared with the preceding five-year period. For new seed traits, the average development timeline has extended to 16.5 years at a cost of $115 million, according to 2022 estimates.
While total costs for seed trait development have declined by roughly 16.7% over the past decade, the process has become 26% longer, underscoring growing regulatory complexity even amid some efficiency gains in research and production. In both segments, the regulatory approval process accounts for a substantial share of total development expenditures. Lengthier review timelines and evolving data requirements increase capital at risk, constrain innovation pipelines and delay the diffusion of productivity-enhancing technologies to farmers.
Post-market agricultural technology developers are also facing a sharp rise in litigation costs. Activist-led legal challenges to pesticide registrations have become more common, creating additional financial and operational uncertainty for registrants. These lawsuits not only impose direct legal costs but also introduce potential market disruptions if product registrations are suspended or revoked.
Farmers have already faced this issue at the operational level with the ongoing regulatory battle surrounding dicamba. The resulting uncertainty can limit growers’ ability to plan crop protection strategies effectively and contribute to input price volatility, particularly when key crop protection tools are withdrawn or constrained during critical production windows.
Phosphates: Globally, fertilizer production increased 27.4% between 2006 and 2022. Despite being one of the world’s largest agricultural producers and consumers of fertilizer, the U.S. has decreased its fertilizer production 5.1% during that time, driven primarily by a reduction in phosphate production due to natural disasters in key phosphate mining areas, including the Texas Freeze and Hurricane Ida in the U.S. Gulf in 2021, Hurricane Ian in Florida in 2022 and Hurricane Milton in 2024. Declining phosphate rock quality in the U.S. has also reduced the supply of finished phosphate fertilizers.
Mine expansion to increase phosphate production remains a long and capital-intensive process. Returns from expansion projects typically take several years to be realized, offering stakeholders little incentive in the short-term to greenlight such projects. Typically, the price gains from tighter supplies offer fertilizer producers higher – and quicker – returns in the short-run relative to new earnings from expansion projects.
Additionally, environmental and community groups have protested past efforts to expand phosphate mining in the U.S., specifically in Florida, due to environmental and safety concerns. Legal action against phosphate mining companies brought forth by these groups creates an additional layer of cost to phosphate production.
Other factors, including a shift towards organic fertilizer instead of synthetic and the Great Recession of 2008, have further reduced production prospects for phosphate fertilizers, leaving the U.S. reliant on imports for about 40% of its phosphate needs. The U.S. largely sourced these inputs from Morocco and Russia between 2017 – 2021. Countervailing duties were applied on Russian and Moroccan phosphate supplies starting in 2021, which not only limited global supply availability to U.S. buyers, but also increased the price of procurement which was eventually passed down to the farmers.
Potash: While the U.S. can theoretically produce its own nitrogen and phosphorus fertilizer products based on existing reserves, a lack of domestic potash mines means the U.S. barely produces 5% of the potash it consumes.
Domestic potash production expansion faces similar capital and time investment hurdles to phosphate mining. As such, the U.S. relies on imports for the remaining 95% of its potash needs, largely from Canada (75%).
Prior to Russia’s invasion of Ukraine and subsequent economic sanctions placed on Russia by the European Union, the U.S. relied on Russian (10%) and Belarusian (8%) potash imports. While the U.S. did not place economic sanctions on Russian potash imports to avoid domestic supply availability issues, Russia imposed a 23.5% duty on all fertilizer exports priced over $450/ton in January 2023.
The combination of European sanctions and increased export taxes on Russian potash supplies forced the U.S. to seek additional sources of affordable potash. In this time, the U.S. increased potash purchases from Israel, though those trade flows have been disrupted by geopolitical tensions in the Middle East region, leading to increased potash prices.
Machinery, Equipment, and Parts: Machinery investments are typically the first item on farmers’ wish lists to be scratched when profit margins are squeezed. The University of Illinois estimates that new agricultural equipment costs increased over 20% between 2021 and 2023.
The University of Illinois estimates that a 310 HP tractor costs $181.10 per hour to run with overhead, fuel and labor. The cost has increased to $255.80 in 2025. Similarly, combining soybeans was estimated to cost $32.70 per hour to run in 2019 while that same setup cost $47.60 in 2025. The majority of the increase in the costs per hour was due to the higher list prices of machinery.
General inflationary pressures, ongoing supply chain issues that arose during the COVID-19 pandemic, labor shortages, reduced production schedules due to low grain farm incomes and new tariff pressures have all created higher costs and supply availability issues in the ag machinery space.
Interest Costs: Interest rates are driven by factors broader than the agricultural sector. The Federal Reserve sets target rates that provide the base for rates. The Fed has a dual mandate to follow when doing so- they must both control inflation and maximize employment. High inflation and relatively strong job numbers have encouraged the Fed to hold interest rates high starting in 2022. That has recently started to change over the past year as the targeted range has gone from over 5% in 2024 to 3.75% to 4.00% currently. The Federal Reserve officials meet in December for a meeting that could result in further interest rate cuts. The officials seem split on the direction of changes as they seek to balance tariff-induced inflation with a slowing job market.
Interest rates translate into farmer financing costs. Long-term debt, such as land-based loans, can be less affected by short-term rate fluctuations. However, the multi-year increase in loan rates means that the interest rates will eventually find their way into the long-term debt.
The most immediate effect is on short-term debt, such as operating loans that farmers take out to finance the annual crop planting. This debt is repaid after the crop is harvested and sold. This year is particularly problematic as trade uncertainty has kept a lid on prices. Any farmers who desired to wait to sell their crops to see if the situation resolved would have to incur elevated loan costs during this time.
Inflation is a central element of economics. When returns increase, more dollars are available to chase limited inputs. This results in an increase in input prices. When farmer revenues drop, input prices should fall again. Alternatively, if revenues do not fall, the higher input prices should spur suppliers to produce more, which would also bring input prices down.
However, that is generally not the pattern that occurs with crop inputs. During the 2000 to 2013 period, input prices and crop prices generally moved together, albeit to higher levels. As crop prices remained depressed during the 2014 to 2020 era, input prices held firm at elevated levels. Once crop revenues again increased from 2021 to 2023, input prices spiked. While crop prices have been falling since this period, input prices have only continued to increase.
Some divergence through time between input prices and output prices can be expected as yields have increased. This effect would naturally create some drift between the two indices, as higher yields increase supply and reduce the price necessary to put an acre into production. Yet, soybean cash prices have remained below breakeven costs since the beginning of 2024, indicating that yield increases are not currently bridging the gap between input and output prices.
Soybean growers have faced revenue challenges this year with the trade war. This event caught farmers at a time when input costs were at levels that allowed no room in operating margins to absorb lower prices. Many factors have pushed up operating costs, including tariffs, regulations, lawsuits and the broader economy. The crop sector faces a phenomenon whereby input costs follow crop prices upward but tend to remain at elevated levels even after crop prices retreat. This has led to negative soy margins for the past three years. As international supply in the soy space continues to grow, controlling costs will be crucial to remaining competitive in foreign markets.
