CoBank: US rural economy faces uncertainty in 2025

“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 US 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.”

The CoBank 2025 outlook report examines several key factors that will shape agriculture and market sectors that serve rural communities throughout the United States.

President-elect Donald Trump’s two main economic policy proposals include enacting significant import tariffs and reducing immigration while deporting undocumented residents.

The United States exported $184 billion in agricultural products in 2023, which was already down from the year prior, and a trade war will put these directly in the line of retaliatory fire, CoBank said.

 Agriculture and construction are the two domestic industries that are most reliant on immigrant labor.

“Depending on how deportation efforts play out, the dairy, meatpacking and produce industries could be severely impacted by intermittent labor shortages,” according to the report.

The trade war with China five years ago was costly to US agriculture, resulting in a loss of $27 billion in agricultural sales to China in 2018-19.

“But that doesn’t include that value of lost market share over time or the additional cost to the American taxpayer from the federal government as a direct payment to cover those losses,” CoBank said. “Since then, China has turned to other suppliers for its food needs, primarily Brazil. China and Brazil recently signed an array of new trade deals, including import access for Brazilian sorghum and pork offal, two sectors that up until now have been dominated by US products.”

 A strengthening US dollar along with the potential for trade disputes and record-large South American crops are weighing on the outlook for grain and oilseed prices in 2025, according to the report.

US farmers are widely expected to struggle with further margin compression as weaker commodity prices test farmers’ ability to lower production costs. Crop input decisions will be evaluated much more closely with a focus on inputs that provide the greatest return on investment.

Economic woes in the United States’ top grain and oilseed export markets — Mexico and China — raise concern over their ability to import grains and oilseeds as their currencies weaken. Foreign customers that front loaded grain and oilseed purchases from the United States ahead of a potential trade war are also carrying greater inventories, thereby implying fewer imports in the future, CoBank said.

The bearish outlook for oil prices diminishes the demand picture for ethanol, biodiesel and renewable diesel. Uncertainty over US biofuel policy under the new administration also clouds the demand outlook for biofuels.