How USAID Cuts Are Reshaping American Farming and Supply Chains

James Pearson
Feb 7, 2025
4 min read

February 7, 2025

As business leaders, we are constantly engaged in risk assessments to evaluate factors that may impact our operations. Whether it’s a process-level review to enhance efficiency or a macro-economic analysis to anticipate shifts in domestic or global markets, these evaluations are essential to maintaining resilience and competitiveness. Understanding the economic consequences of policy changes—such as reductions in USAID funding and shifts in GSA procurement—becomes a fundamental responsibility for businesses operating in interconnected supply chains.

Understanding the Economic Ripple Effect

The United States has long played a central role in global food security, with American farmers and food producers serving as key suppliers for international aid programs. One of the largest federal buyers of U.S. agricultural products has been the U.S. Agency for International Development (USAID), which purchases commodities such as wheat, soybeans, lentils, and rice for distribution in food aid programs. Recent reductions in USAID funding and its operations have generated significant discussion around the economic impact on American farmers, food producers, and supply chains.

This article examines the direct and indirect economic effects of these cuts and assesses the broader risks associated with changes in the General Services Administration (GSA) and its role in supporting domestic industry.

The Role of USAID in U.S. Agriculture

In 2024, USAID purchased approximately $2 billion worth of U.S.-grown crops for its international food aid programs. These purchases created a stable demand for American farmers and food processors, offering price support for surplus commodities and benefiting logistics providers who handled distribution.

Key benefits of USAID food aid procurement included:

Price Stability – By absorbing excess agricultural supply, USAID purchases helped stabilize commodity prices in the face of market fluctuations.
Support for Rural Economies – Farmers, grain elevators, processing plants, and logistics firms all benefited from these contracts, with ripple effects on rural employment.
Infrastructure Utilization – The transportation and shipping industries moved USAID-purchased commodities to ports and recipient countries, ensuring continued investment in domestic logistics capacity.

Supply Chain Disruptions and Economic Risks

The reduction in USAID food purchases has created uncertainty for multiple industries within the agricultural supply chain, from farmers to food processors and freight carriers.

Impact on Farmers and Producers

Surplus Stock Issues: Without USAID purchases, grain and legume surpluses increase, which could drive down market prices and impact farmer revenues.
Reduced Market Predictability: Farmers rely on long-term purchasing commitments to plan their planting and harvesting schedules. The loss of a large government buyer increases uncertainty.
Regional Impact: Agricultural states such as Iowa, Kansas, North Dakota, and Illinois may experience greater price volatility due to reduced guaranteed demand for staple crops.

Impact on Logistics and Transportation

Shipping Industry Consequences: USAID programs historically relied on U.S.-flagged vessels for transportation, supporting the domestic maritime industry. The reduction in these shipments could decrease freight demand, impacting logistics companies.
Port and Rail Implications: Reduced agricultural exports could lower activity at major agricultural export hubs, such as ports along the Mississippi River, Gulf Coast, and Pacific Northwest.

Economic Spillover Effects

Processing and Storage: The drying, milling, and packaging industries, which prepare commodities for export, could see reduced demand, affecting jobs and production efficiency.
Commodity Trading: The global agricultural market could shift, with foreign competitors stepping in to fill the gap, potentially reducing U.S. influence in global food markets over time.

Assessing the Economic Contribution of the GSA

The General Services Administration (GSA) is often viewed as a procurement and logistics hub for federal agencies. However, its economic footprint extends far beyond government operations. As one of the largest managers of federal real estate, fleet vehicles, and purchasing contracts, GSA plays a critical role in the domestic economy by driving demand for:

Commercial Real Estate: GSA leases office space and industrial facilities, impacting property values and economic activity in cities nationwide.
Small Business Procurement: Many small and mid-sized businesses rely on GSA contracts to supply goods and services, ensuring economic stability for contractors.
Fleet and Transportation Services: The GSA Fleet program purchases and maintains government vehicles, supporting the domestic automotive and maintenance sectors.

Risk Assessment: The GSA’s Role in Economic Stability

Supply Chain Disruptions – If GSA contract reductions occur without a well-managed transition, businesses dependent on government procurement could experience cash flow challenges, layoffs, or closures.
Real Estate Market Volatility – Reductions in GSA lease agreements could impact urban commercial real estate, particularly in cities with a high concentration of federal offices.
Business Procurement Shifts – Changes in GSA purchasing strategies could either bolster domestic suppliers (if prioritizing U.S.-made goods) or reduce economic activity (if cutting contracts without alternatives).

While discussions on government efficiency and spending cuts are ongoing, the economic impact of these decisions must be carefully evaluated. USAID’s historical role in stabilizing agricultural markets and GSA’s role in supporting domestic industries cannot be overlooked. Policymakers, businesses, and industry stakeholders should closely monitor how these changes impact the broader economic landscape, ensuring that shifts in policy do not create unintended economic consequences for American industries.

Engage in the Conversation How do you see these changes affecting your industry? Share your insights in the comments below.