USMCA Stability Critical for Strained US Farm Economy

American farmers are urging the preservation of the U.S.-Mexico-Canada Agreement (USMCA) as formal review negotiations commence. For many agricultural producers, cross-border trade has become a financial lifeline amid a deteriorating farm economy characterized by weak commodity prices and escalating operational expenses. Iowa farmer Stu Swanson reported that producers are operating on dwindling hope as financial pressures mount. The agreement, which began its mandated six-year review process, governs a trade relationship that CoBank CEO Tom Halverson notes has seen U.S. agricultural exports to its neighbors grow by approximately 600% since the original NAFTA pact took effect.

Context — why this matters now

The USMCA officially entered into force on July 1, 2020, and includes a sunset clause requiring a joint review every six years. The current negotiations, beginning in mid-2026, will determine the agreement's future. This review occurs against a backdrop of significant sectoral stress. The USDA forecasts a 17.7% year-over-year decline in U.S. net farm income for 2026, continuing a downward trend from the record highs of 2022. Key inputs like fertilizer and fuel remain costly, while global grain prices have softened from their post-invasion peaks. The triggering event for farmer anxiety is the inherent uncertainty of the renegotiation process, which opens the door for potential disputes over market access that could disrupt vital export channels.

Historical parallels exist with the renegotiation of NAFTA into USMCA between 2017 and 2019. During that period, agricultural trade faced volatility as tariffs and market access were debated. Mexico temporarily threatened tariffs on U.S. pork, and Canadian dairy market concessions became a central sticking point. The current review renews fears of similar disruptions. The agricultural sector's reliance on these markets has only deepened since then, making stability paramount. Trade disputes with other global partners have further heightened the importance of reliable North American markets.

Data — what the numbers show

U.S. agricultural exports to Canada and Mexico have expanded dramatically, underscoring their critical importance. The growth of roughly 600% since NAFTA's inception in 1994 translates into a trade relationship now valued at over $70 billion annually. Canada and Mexico are the top two export destinations for U.S. agricultural goods, accounting for nearly one-third of total export value.

Commodity	Export Value to Canada & Mexico (Annual Estimate)	Key Product Examples
Animal Products	~$15 Billion	Pork, Beef, Dairy
Grains & Feeds	~$20 Billion	Corn, Soybeans, Wheat
Horticultural Products	~$12 Billion	Fresh Vegetables, Fruit, Nuts

This trade volume is a stark contrast to the broader financial pressures within the farm sector. National farm debt is projected to exceed $535 billion in 2026. The Kansas City Fed's February 2026 report noted that farm loan delinquencies had reached a four-year high. These figures highlight the sector's fragility and its acute sensitivity to any disruption in its largest export markets.

Analysis — what it means for markets / sectors

Preserving USMCA terms directly supports the bottom line of major agricultural corporations and cooperatives. Companies with significant exposure to North American trade, such as meat processors like Tyson Foods (TSN) and Hormel Foods (HRL), and grain traders like Archer-Daniels-Midland (ADM), have significant revenue streams dependent on smooth cross-border logistics. A stable agreement prevents tariffs and safeguards just-in-time supply chains for perishable goods. The North American meat and grain complexes are deeply integrated, meaning disruptions would increase costs industry-wide.

A key risk to this outlook is political posturing. While a full termination of USMCA is considered unlikely, targeted sectors could face new trade barriers if negotiations become contentious. The Canadian dairy sector, which was a major point of contention in the last negotiation, remains a potential flashpoint. Any new restrictions on U.S. dairy or poultry exports would negatively impact producers in states like Wisconsin and Georgia. Market positioning shows agricultural trade groups are heavily lobbying for a status-quo outcome, prioritizing certainty over ambitious expansion of the agreement's terms.

Outlook — what to watch next

The primary catalyst is the conclusion of the USMCA review process, with a key deadline for agreement extensions falling in late 2026. The tone of statements from U.S., Mexican, and Canadian trade representatives following negotiation rounds will serve as an early indicator of potential friction. Market participants should monitor USDA export sales reports for any unusual declines in shipments to Mexico or Canada, which could signal preemptive trade flow disruptions.

Levels to watch include monthly agricultural export values, which should maintain their trend near record highs for North American trade. A sustained drop of 10% or more would signal serious market anxiety. The health of the broader farm economy, as measured by quarterly updates on farm debt and delinquency rates from the Federal Reserve Banks of Chicago and Kansas City, will also be a critical barometer of the sector's ability to withstand any new trade shocks. The next USDA Farm Income Forecast, scheduled for August 2026, will provide an updated assessment of financial strain.

Frequently Asked Questions

What specific US agricultural products rely most on USMCA?

Dairy, poultry, and eggs are particularly reliant because Canada and Mexico are the first and second largest export markets for these products. Corn and soybeans also see massive volumes, with Mexico being the top export destination for U.S. corn. Pork exports to Mexico are vital, with over $2 billion in annual sales representing a critical outlet for U.S. producers. This market diversification within North America provides a buffer when demand from other global partners, like China, fluctuates.

How does USMCA differ from the original NAFTA for farmers?

USMCA modernized the trade pact with specific gains for the U.S. agricultural sector. It increased U.S. access to Canada’s protected dairy market, which was a key negotiating objective. The agreement also established new rules for geographical indications to protect common food names like certain cheeses. However, the core framework that enabled tariff-free trade for the vast majority of agricultural products remained intact, preserving the foundational benefits established under NAFTA that fueled the 600% export growth.