The U.S. economy remains resilient, benefiting from solid growth, low unemployment and controlled inflation. However, according to an outlook report from CoBank’s Knowledge Exchange, rural America faces greater uncertainty due to its vulnerability to federal policies on trade, immigration, climate and economic development.
“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.”
CoBank said challenges such as high input costs and low commodity prices strain rural industries. While the outcomes of the 2024 elections create policy ambiguity, key risks for rural sectors include potential trade wars, labor shortages and uncertainty surrounding the farm bill renewal, which are critical for agriculture and rural community welfare.
Economy
The report said most economists are projecting 2025 U.S. growth domestic product growth at around 2.5-3%, similar to current levels. These forecasts rely on assumptions rather than concrete policy details, including tariffs of 10-20% on China (and 10% on other countries), a modest but delayed fiscal stimulus from tax cuts, and a slower rate of immigration rather than large-scale deportations proposed during the campaign.
However, the report noted that President-elect Donald Trump’s supporters are not expecting “more of the same.” A second Trump administration is likely to wield executive power more assertively, with higher tariffs and a crackdown on undocumented immigrants, the report continued. This would particularly impact industries like construction and agriculture that rely heavily on immigrant labor.
The report noted labor shortages caused by deportation efforts could severely impact agriculture’s reliance on immigrant labor, especially in the dairy, meatpacking and produce sectors. While U.S. exporters have shifted focus to Mexico, Trump’s threat of 25% tariffs on Mexico and Canada—America’s largest agricultural trade partners—adds further uncertainty. CoBank warns that a global trade war could devastate U.S. agriculture, as competitors like Brazil, Russia and Argentina are poised to meet growing global demand for food products.
“So hopefully, the economic consensus is right for a change,” the report said. “Maybe Trump’s campaign proposals were mostly for show and a negotiating tactic. If not, there’s a good chance that we could see both rising prices and weaker employment in 2025.”
Animal proteins
According to CoBank, the livestock sector is experiencing a boom as feed costs, roughly half of livestock expenses, have dropped significantly from record highs over the past two years. This decline has spurred renewed interest in expanding animal protein production. However, the report said elevated labor, construction, equipment, land and financing costs continue to pose challenges, tempering growth expectations for the sector.
“As a result of a volatile market and poor pasture conditions, U.S. beef cow herd expansion is not expected to start until 2026 or 2027,” CoBank said. “The shrinking herd will further support higher feeder and fed cattle values, and it would not be surprising to see fed cattle values eclipse $200/cwt in the coming year.”
CoBank noted tight feeder supplies, low feed costs and strong beef demand have led to heavier carcass weights, rising nearly 30 pounds in 2024—well above the 5-lb. trendline of the past two decades. Low corn prices and limited cattle supplies mean longer feeding periods, while packer margins will face pressure in 2025 as retail and food service struggle to pass on higher costs.
Despite inflation, the report noted consumer demand for beef, chicken, pork and turkey remains strong, with USDA projecting stable or 2% growth in per capita consumption. Mexico remains vital for U.S. agriculture, serving as a top destination for pork and poultry and a source of cattle for U.S. feedlots.
Grains, biofuels
CoBank said the grain and oilseed market faces challenges from a strong dollar, potential trade disruptions and increased competition from record South American crops. Economic challenges in key U.S. grain and oilseed export markets, like Mexico and China, raise concerns as their weakening currencies limit purchasing power.
Domestically, the report noted that biofuel demand for corn and soybeans remains strong, with low prices supporting ethanol and soybean processing margins. However, weaker energy prices could slow the growth of ethanol, biodiesel and renewable diesel demand. Meanwhile, CoBank said livestock demand for feed grains remains robust, as profitable feeding margins encourage continued consumption.
USDA’s Agricultural Projections report released in November anticipates shifts in planted acreage, with corn gaining ground over soybeans due to better market prospects.
Farm supply
The CoBank report highlights the challenges farmers face amid a depressed commodity cycle. Tight margins prompt input reductions and careful evaluation of return on investment, primarily driven by yield output. Without new demand or significant weather events, commodity prices may struggle to cover input costs, adding stress to the agricultural economy.
The report noted that farmers are cutting machinery purchases and seeking savings on chemicals by shifting to generics, especially as key agrichemical patents expire.
The report had a bright spot, with CoBank stating real estate values remain firm, and the debt-to-asset ratio remains elevated.
“Farm real estate values remain firm, although increases have moderated or turned slightly lower in certain regions,” CoBank said. “Farmland collateral has helped soften the blow of higher operating lines needed to offset the continued high input cost environment. Farmers’ debt-to-asset ratio remains strong, but is likely to continue slowly deteriorating heading into 2025.” — Charles Wallace, WLJ contributing editor
