Why U.S. farmers rely on soy (and why they're in trouble)

So, it's 2025 and at some point people are going to figure out that if you are texting in public and if there are photographers around with long lenses, well, those photographers are going to be able to read what you are texting on your phone. This fact explains why we now know that the Trump administration is internally worried about how their trade and foreign policies are hurting soybean farmers. US Treasury Secretary Scott Bessant was in plain view of an Associated Press photojournalist last week while he was carelessly conducting a politically sensitive internal conversation with apparently Agriculture Secretary Brooke Rollins. Now, here is what she texted to the Treasury Secretary. Quote, "We bailed out Argentina yesterday, and in return, the Argentines are removing their export tariffs on grains, reducing their price, and they sold a bunch of soybeans to China at a time when we would normally be selling to China. Soy prices are dropping further because of it. This gives China more leverage on us." End quote. Now, you might not be able to understand what all of that means yet, but that is not something that Donald Trump's agriculture secretary would likely say in public right now. This is an oops. Apart from the thrill of reading the private communications of powerful people, this text message offers us a prism through which we can learn a whole lot of important basic things about how the globalized food supply works, how trade wars work, whether American farmers are about to be bankrupted by the administration that most of them voted for, and we can learn why soybeans are in everything, or rather why farmers love growing ing soy, which in turn helps to explain why soy is in everything. Or maybe the other way around. I suppose it's a chicken and egg dilemma. So that's what we're going to learn about together today, right after I thank today's sponsor, Factor. Lots of people think that because Adam Regusia is a famous internet cook that means that he cooks all the time. I do not. I have other priorities in my life and increasingly so. I've been focusing a lot on my health again lately, trying to tighten some things up, and Factor has really helped me with that. They send boxes of ready-made fresh, not frozen meals directly to my door. I throw them in the fridge, and then whenever I need some lean protein and vegetables, I just pop one of these in the microwave. I don't know if Factor will be pleased with this characterization, but these meals are basically TV dinners, but good for you and good. Like really good. I am constantly shocked by how tasty and kind of sophisticated these dishes really are. Like this uh smoky paprika chicken and carrots. That's the kind of thing I would totally make for myself, but I didn't have to. And that is awesome. factor allows me to eat well through the whole day, even when I'm really busy reading about a industry gossip or something. Whatever your dietary goals or restrictions are, Factor probably has a plan for you. They now offer 80 plus rotating meals every week. Check them out at factor75.com or click my link below. Use code Regusia FB50 to get 50% off plus free breakfast for a year. That's the FB. That's code regusia FB50 at factor75.com to get 50% off plus free breakfast for a year. Thank you, Factor. So to understand why soy is so important to us farmers, you got to understand what we mostly grow in this country and where. We produce a lot of cattle in the US, lots of beef, especially out west where there is endless land, but it's semierid. It's good enough for grazing. We grow our fresh fruits and vegetables mainly in California and some down in Florida. We do dairy in the Northeast and the upper Midwest, chicken houses all across the Southeast where I live. But the highest concentration of farms by far and the biggest agricultural money by far comes from the heartland, which is the lower Midwest going into the plain states. So, western Ohio, Indiana, Illinois, Missouri, Iowa, of course, parts of Nebraska, South Dakota, southern Minnesota, thereabouts. This is the heartland, the bread basket of America, where we grow the majority of our cash grains. And grains in this context includes soy, even though soy is technically a bean. Cash means it's a crop for selling, not for eating, not for feeding your local market. Ians could not possibly eat all the corn that they grow, and they don't care because it's their most valuable crop to sell. followed by soybeans. The corn is worth more, but it relies on the soy. Corn is super easy to grow. You barely need any humans to farm it anymore. You just need some big expensive equipment. But like many crops, corn depletes the soil of nitrogen. It needs a lot of nitrogen to biosynthesize its chlorophyll and all its proteins. If you grow corn on the same field season after season, your harvest will get worse and worse as you burn through the available nitrogen in the soil. 19th and early 20th century American farmers figured this out the hard way. In my part of the country, they found out the hard way that cotton does the same thing. So, how do you restore nitrogen to the soil? Well, you can use fertilizer. If you're also raising livestock, you can use their manure and their pee, but that won't get you enough nitrogen to support the level of corn production that they do in the heartland. You can use synthetic nitrogen fertilizers which are most commonly made from natural gas. Actually, technically they're made of uh nitrogen from the atmosphere. But you use natural gas as a source of hydrogen needed for the chemical process and you also burn the gas to power the process. It's a pretty nasty dirty thing. and the resulting ammonia or ura fertilizers are quite expensive when used on the scale that's necessary to grow corn. Farmers in the corn belt definitely use synthetic nitrogen fertilizers, but they can get away with using less and therefore spending less if they also use the simple ancient technology of crop rotation. You grow corn on the field one year, it depletes the nitrogen and then the next year you grow a different crop that actually contributes nitrogen to the soil like legumes. Beans, magic beans. Legumes are these magical freaking plants that have a symbiotic relationship with bacteria that live on their roots. The bacteria feed on carbs from the bean plant and then as part of their natural metabolic process, these bacteria pull nitrogen out of the atmosphere and convert it into ammonia. The bean plant uses the ammonia as a source of nitrogen to make all of that protein that we know and love from beans and other legumes. The process restores a lot of nitrogen to the soil free and naturally and at the end you get some beans you can harvest as a bonus. It doesn't have to be beans. There are cover crops that you can grow that will fix nitrogen. You know, placeholder crops like clover, but you can't sell much clover. You can sell beef and there are forage crops that you can grow for grazing that will also fix nitrogen like alalfa. But most of the acres in the American heartland are just too valuable for ranching. Grazing takes up a ton of land which is one reason you normally do it on cheap semi-arid land. This is expensive land we're talking about in the heartland. you can make a lot more money growing grains on it. And in this context, soybeans are also a grain. Soy is the main crop that Heartland farmers use to fix nitrogen for next year's corn crop. Why soy? Soybeans are incredibly productive. You can grow them well in many kinds of soil, many different climates. It's not like lentils, which really only grow super well in the Northwest. It's not like peanuts, which you can only really grow in the South, cuz peanuts need heat and sandy soil. Neither are available in eastern Nebraska. Soybeans are easy to grow. You grow them just like any other grain crop. You drop the seeds in the field, you let the plants grow and then die and dry out and then you just mow through them with a combine harvester. It's not like various uh pole beans that have to be trained up a tall trellis and then brought down somehow. Soybeans are simple and there's a market for them. Soybeans are freakishly high in protein, of course, but also very high in oil. They double as an oil seed. You get the oil and you get the protein which is a rare complete protein in the plant kingdom. It has exactly the right proportion of amino acids for feeding people and livestock. These are easily extractable commodities that can be used as the basis for all kinds of processed foods and feeds. Soybeans are the ideal cash crop to rotate with corn in the great American corn belt. That's why nearly every serial farmer in the US is also at least some of the time a soy farmer. Because of the aforementioned trade war, which we'll get into in a second, the prices that US farmers can get for their soy are quite low right now. I was just uh corresponding with a farmer who brought in his soy harvest the other day and I said, "Hey, how's the price looking?" And he said, "It's bad, but not yet catastrophic for his particular situation." I asked him, "Hey, is there is there some other legume that you would ever consider rotating with? Some other crop that would help restore the nitrogen that your corn depletes?" And this farmer was like, "Nah, not really." Because even if he started growing black beans or kinoa or something, he would have no place to sell it. Just because you grow a crop and just because there exists a market for that crop somewhere, that does not mean that you can actually connect those two dots. You can't just FedEx a thousand bushels of beans to somebody. The way you normally dispose of your crop once harvested is you drive it to your local agricultural cooperative, the co-op, which pays market value to all the farmers within maybe a couple hours drive. The co-op then sells it to a bigger buyer which sells it to somebody else which sells it to somebody else. That model only works if all the farmers are pooling the same kinds of crops together in one place where a truck or a train can pick it all up. You cannot think of grain farming as though it were vegetable farming for your local market. It's an industrialcale activity that usually operates on very thin profit margins and therefore it's only worth doing at huge scales. If you're the only weirdo downstate who's growing quinoa, you're going to pull up to the co-op and they're going to say, "We don't take quinoa." every farmer in the region would have to switch to quinoa at the same time to get the scale that would make it worthwhile for their co-op to buy it and sell it. That's assuming that quinoa would even be worth growing at that scale. Quinoa is also a terrible example because I think you can only grow it at high altitudes. But I suppose that further proves my point that soy is special. We have the perfect setup for growing soy here in the United States. So perfect that we grow far more soy than our domestic market could ever use. We export like half of our soy to the rest of the world. It is our number one agricultural export by a country mile. We export a lot of corn, a lot of beef, but they don't even come close to soy in dollar value exported. Soy is number one. And the number one buyer of US soy has historically been China. They use it mostly for oil and for pig feed. Relative to their stupendous population size, the Chinese do not have that much prime farmland. They prioritize growing their own staple crops for human consumption on their own soil. Things like rice makes sense. The countries of the world have a legitimate interest in prioritizing and protecting domestic industries that are particularly important to them. For example, it would be cheaper for us in the US to buy all our steel from Mexico, but we want to maintain our own domestic steel industry in case the global trade system collapses because steel is so important. So that's why we have a tariff on imported steel. Tariffs are a tax on imports. If I have a steel importing company in the US, I buy steel from Mexico and when I bring it over the border, I have to pay the federal government a 25% tax on the value that I'm importing. Actually, the Trump administration recently knocked that up to a 50%. And like all other costs, the cost of the tariff is ultimately passed down to the consumer. A country's import tariffs are ultimately a sales tax on its own citizens. Why would you do this to yourself? Why would the US government make imported steel more expensive for its own industries to buy? Well, to keep the domestic steel industry competitive. It's more expensive to make steel in the US than in Mexico for lots of reasons, probably mostly labor costs. So, if you want to maintain a domestic steel industry, you have to artificially make the imported steel as expensive as the domestic steel so that people will still have a reason to buy domestic steel and to keep that industry alive. so that you'll still be able to build cars and skyscrapers and aircraft carriers in the event of a global trade disruption. It makes sense, right? Tariffs do make the economy less efficient. They make everything more expensive and not just because you have to pay the tariff. If you want the most efficient economy possible with the cheapest goods, you want to make the goods in the places where it is cheapest to make them. Every country in the world makes the stuff that they are most efficient at making and then we trade with each other to get all the stuff that we need. This is how global trade has made nearly every human on Earth richer. some a lot more than others, but it's not a zero- sum game. That said, economic efficiency is not the only legitimate goal in life. We also care about other things like maintaining some level of independence from each other, like maintaining a way of life that's associated with a specific industry. It can be a legitimate policy choice to prioritize those things above having the cheapest possible goods at all times. This is why the US and pretty much every other country has always had tariffs. Donald Trump did not invent tariffs. We've long had tariffs to protect our domestic food supply, for example. But normally tariffs are set by Congress and enshrined into statutory law set to expire or be renewed like 10, 20 years in the future. Why? Because tariffs generally only have their intended effect if everybody believes they are permanent. The point of a tariff is to encourage a business in your country to build a factory or something. If you're a business person, you only make those kinds of capital inensive investments if you believe they're going to pay off in the long term. The only way you can get financing to build your factory is if you can show your investors that it will pay off long term and not get undercut by cheaper imports at some point. If both political parties in Congress have come together and adopted a 10-year tariff, that provides you and your investors with some confidence. You're not worried that everything is going to change after the next election. President Trump has used incredibly legally dubious authority to unilaterally place enormous tariffs on almost everyone for almost everything without going through Congress. Businesses have every reason to believe that these tariffs are going to go away after the next election or perhaps even sooner. Trump himself keeps changing them from day to day. The US Supreme Court in about a month is going to consider whether the president even has the legal authority to do this at all by himself. And while that court has been extremely accommodating of Trump lately, this may be a place where they draw a line. This court seems to love Trump, but they also love big business. And big business will be here long after Trump is gone. No business is going to make a long-term investment based on tariffs that could be gone by Christmas. So, we're probably not getting any of the intended benefits of these new tariffs. What we're getting instead is all the painful side effects, most notably retaliatory tariffs from other countries. When we put a tariff on another country's industry, that hurts their industry and they don't like that. So, they put tariffs on our exports in response and that is a trade war. We are in a trade war with basically the whole world right now. but China in particular. And as an aside, I will say there are a lot of legitimate reasons to start a trade war with China. I just want us to be smart about it. And I don't think we're being smart about it for all of the aforementioned reasons and and more. But that's beside the point. China has retaliated against the US by among other things not importing a single US soybean since May. Most soy is harvested in the fall nowish. Farmers need to sell it now so that they can pay back the bank loan that they used to buy all the seed and the fertilizer and the pesticides that they needed for the season. And now the marketplace for their soy has shrunk. So the price has shrunk. Too much supply for too little available demand. Soy prices are down by almost half compared to this time last year. So Agriculture Secretary Rollins has been trying to pressure China into reopening its market for US soy. That's what she meant in her private text message to the Treasury Secretary when she talked about leverage on China. Leverage to pressure China to buy our beans. And what was she saying has robbed her of that leverage? The Trump administration's foreign policy with regard to Argentina of all places. Argentina is in a fiscal crisis. Trump's Treasury Secretary, the other guy on that text thread, he just offered the Argentinian government a $20 billion credit line to help stabilize their country, or you could say to help stabilize their government. The cynical reading of these events is that Trump is an ideological ally of Argentinian President Jabier Malay. Malay has been doing the kind of stuff that Trump wants to do here, like dramatically slashing government spending in certain areas. Team Trump views Argentina as a kind of proof of concept for the United States. They don't want that experiment to fail. So, they're using the US Treasury to prop up Argentina's Treasury. That is the cynical reading. The less cynical reading is Argentina is a really important country in our hemisphere and it is in our interest to help out our neighbors. I think it's a combination of both. Though I do think the cynical explanation is probably dominant in this case. Anyway, we, the US, we offered Argentina this bailout. And then Argentina turned around and took off their export tax on Argentinian soybeans, which made them cheaper for China to buy. So, China bought them. China is now getting all the soy they need from Brazil and Argentina. And that market may be lost to the US for the foreseeable future. They don't need us anymore. We played hard ball. So the Chinese decided to play with somebody else. This is what Agriculture Secretary Rollins was justifiably angry about in her private text to Treasury Secretary Bessant. She was saying, "Hey, Trump is screwing over US farmers to prop up a fellow right-wing populist abroad." Which is obviously not something she would ever say in public because it sounds really bad. Just keep texting at news conferences, guys. We are quite happy to read your internal disputes through an AP telephoto lens. The US agricultural lobby was squarely behind President Trump in the last election, even though they knew Trump would restart the trade war that hurt them in the first Trump administration. And one reason they did this is that they believed that Trump would bail them out again like he did last time. The first Trump administration sent checks, taxpayer subsidies to US farmers who lost money because of the trade war. Trump has said he will do that again this time, but he's not doing it fast enough. A lot of farmers need that cash now, not next year. They need to pay off their debts from this season, and they need to buy all of the inputs that they're going to need for next season. otherwise they cannot plant the next season. Meanwhile, of course, mass deportation is devastating the a industry's labor base, though that has limited applicability to the grain farmers that we're talking about right now. Grain is not very labor intensive anymore, though immigration issues do still affect those farmers often downstream in say the meat industry that that buys soybeans for feed. Trump has said he will use tariff revenue to subsidize farmers, but that hasn't happened yet. And what if the Supreme Court decides that the tariffs were illegal in the first place? The government might even have to give that money back to the importers who paid it. There's a lot going on here with US farmers. When we talk about farmers, what we usually mostly mean is farm owners. They may work the farm themselves, at least part-time. But we're not talking about lowly farm laborers here. We're talking about farm owners. Farmland, especially in the heartland, is incredibly valuable. So farm owners aren't just thinking about how much money they can make from their crop. They're also thinking about tax rates on the rich. According to the most recent USDA figures, 56% of US farm households are both high income and high wealth, meaning that they make a lot of money every year and they own a lot of assets like their farmland. Now, 40% of US farm households, which is most of the rest of them, 40% are lowincome but still high wealth. Farmers aren't just thinking about how much money they can get for their crops. They're also thinking about how many millions they can get for their land and how much they're going to pay in taxes. So from their perspective, it might make sense to vote for the candidate who lowers taxes on the rich, even if that same candidate is going to lower soy prices at the same time. Now, I'm honestly not sure if that math actually works out for most farmers, but let's say that it does just for the sake of argument. Just because it makes sense to the farmers doesn't mean that it makes sense for the rest of us, it doesn't mean that it makes sense for us to put a huge new sales tax on all the imported stuff we buy just so that we can turn around and give that money to mostly rich farmers because their farms aren't profitable enough because of said huge new sales taxes. Or maybe it does make sense for us. I like having food. I like having an ample domestic supply of food in the event of a global trade collapse. I like having familyowned farms instead of big aggra business owning every acre in America. I worry that if we let farmers live with the consequences of their own political choices, lots of them will be forced to sell their land to big aggra business or other giants. But one of the reasons why say institutional investors like buying farmland, one of the reasons they like to do that is that they regard farmland as a stable asset. And one of the reasons that asset is so stable is that the government keeps bailing out farms. Institutional investors love it when they can privatize the profits but socialize the losses. And farmland offers them the opportunity to do just that. So, does bailing out farmers make it less or more likely that all the farms will get bought up by big companies? I do not have the expertise to say. I don't know. But this is an active conversation in a policy reform circles that I continue to follow closely and you may want to as well. It's important to point out that everything I just said about farmers is a gross generality. There are many exceptions, but broadly speaking, this is the deal. At least from my vantage point, which is admittedly limited, and I'm sure you don't need me to tell you to seek out other vantage points to balance or at least contextualize what you hear from me. You might not believe this, but I do not love talking about politics on this channel. I find politics quite distasteful. But I need to get over that because when good normal people like you and me stay out of politics, we leave it to the bad abnormal people. And I don't think that that's been going very well lately. So, I will continue to talk about politics when relevant to the core content area of this channel, even if it costs me a few subscribers. Thank you for making it to the end. Before you hit unsubscribe, all I ask is that you make what you think are good choices. Talk to you next time.