CoBank has released its 2025 outlook report, which outlines the key themes the organization expects to shape agriculture and the rural economy in the coming year. While there are several factors to watch, they mainly stem from one place: federal policy.
“The environment we enter in 2025 hasn’t fully defined itself yet, but many of the policies proposed by the incoming administration would likely have a negative impact on U.S. agriculture,” said Rob Fox, director of CoBank’s Knowledge Exchange. “Open access to export markets and labor availability are critically important for agricultural producers and processors. Depending on how policy plays out, those two areas could be big challenges in 2025 and beyond.”
As a new economic era begins, here are the six main forces at play:
Threat of A Trade War
A large focus of President-elect Trump’s campaign was on significant import tariffs. While we don’t know exactly what this policy would look like, it is unlikely to produce a positive outcome for crop or livestock producers.
Fox writes, “These policies could achieve some limited objectives, but it is very hard to paint them as anything but negative for the U.S. farm economy.”
If a trade war was to ensue, it could also be very costly for agriculture. A recent joint study by the national corn and soybean associations estimates the 2018-19 trade war with China cost the U.S. a total of $27 billion in agricultural sales to China over those two years.
Export Competition
Alongside the potential for a trade war, export competition from Russia and South America poses another treat.
According to the report, Russia’s currency is weakening - which is expected to anchor global wheat prices and allow Russia’s wheat to be more competitive.
At the same time, Brazil’s currency is also weakening and exports from the country will be cheaper than those from the U.S. This is coupled with the forecast of record South American corn and soybean crops.
With an abundance of soybeans globally, CoBank is anticipating many U.S. acres to shift from soybeans to corn this year as well.
Labor Challenges
Another likely outcome of the upcoming Trump administration is a decreased labor supply.
The president-elect has proposed deportation and reduced immigration, which could negatively impact the dairy, meatpacking and produce industries by causing labor shortages and driving up costs.
Livestock Sector Investment and Growth
It’s not all bad news for the dairy industry, though. According to the report, the U.S. will see an unprecedented $8 billion in new dairy processing investment through 2026 - and some of those plants will come online in 2025.
The livestock sector as a whole is benefiting from low feed costs, and specifically in the beef industry, a reduced herd size is supporting higher feeder and fed cattle values.
The USDA Economic Research Service projects per capita consumption of chicken, beef, pork and turkey to remain stable or grow up to 2% from 2024 to 2025.
It’s important to note, however, there could be retaliation from potential tariffs placed on major dairy export customers such as Mexico and China.
Tight Margins
Reduced income and tighter margins for the crop industry are expected to continue in 2025.
CoBank anticipates input decisions being driven largely by what provides the greatest return on investment, and farmers may look to switch chemicals to generics.
During this time, it will be critical for ag retailers to provide tailored agronomic advice and technical assistance.
Biofuel Uncertainty
On the biofuel front, headwinds are expected to continue into 2025 - with the Trump administration adding more regulatory uncertainty.
Projections of note include:
- A modest increase in biofuel production next year, although ethanol supplies will maintain 2024 production levels of 1.05 million barrels per day, according to the Energy Information Administration.
- Renewable diesel production capacity will grow just 100 million gallons from 2024 to 2025 to a total of 5.2 billion and remain steady through 2026, according to an updated analysis from University of Illinois.
- Federal and state tax incentives and low carbon fuel policies will drive the future viability of sustainable aviation fuel.
To read the full report from CoBank, click here.
