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Trade War Damages Investments in Agriculture
Over the years much of American agriculture has become a highly leveraged and high cost of entry business. How the trade war damages investments in agriculture is compounded by these facts. A recent article in The New York Times focuses on the loss of soybean markets in China due to the trade war and the damage that is doing to North Dakota soybean growers. Many investors have never visited, much less worked on, a farm or have any idea about how US agriculture has changed over the recent decades.
Mechanization and Consolidation of US Farms
The Midwestern USA is one of the breadbaskets of the world. The climate and soil are ideal for growing things and the USA is a major producer of corn, soybeans, wheat, cattle, pork, and poultry. Over the decades, starting with farm implement inventions in the 19th century, farming has become increasingly mechanized. A farmer with more farmland and the equipment to cultivate, plant, fertilize, deal with weeds, and harvest more efficiently makes a better profit. Since a big tractor can just as easily be used to plow and plant 320 acres instead of 160 acres (half a square mile versus a quarter of a square mile), a farmer with more farmland can be more efficient and more profitable than a smaller farmer. This has led to bigger farms, more investment, and greater investment risk in American agriculture. Here are just a couple of examples.