US, Global Ag Economies Face Uncertainties Heading Into 2025 – Farm Policy News

CoBank reported earlier this December that “the U.S. continues to benefit from solid economic growth, low unemployment and moderating inflation. From today’s vantage point, the U.S. economy seems likely to continue on that trajectory into 2025. However, the outlook for the rural economy is more volatile and uncertain. Rural industries are disproportionately exposed to federal policy, and the outcome of the 2024 election cycle promises to bring significant changes in the federal government’s approach to everything from international trade and immigration to energy exploration and rural economic development.”

“According to a comprehensive year-ahead outlook report from CoBank’s Knowledge Exchange, the high level of policy uncertainty facing rural industries adds to their already long list of headwinds and challenges,” CoBank reported. “‘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.’”

“The short-lived commodity boom precipitated by global droughts, the war in Ukraine and COVID-19 supply issues is now a distant memory. Row crop prices are down nearly 50% from their 2022 highs,” CoBank reported. “But production costs have remained elevated, and profitability has plunged to decade-plus lows. The silver lining is that dairy and livestock producers are generally profitable due to low feed costs and resilient consumer demand. However, more headwinds may be coming for both the crop and livestock sectors. President-elect Trump rode to victory on two main economic policy proposals: enact significant import tariffs and reduce immigration while deporting undocumented residents. In theory, these policies could achieve some limited objectives, but it is hard to paint them as anything but negative for the U.S. farm economy.”

“A strengthening U.S. dollar, combined with the potential for trade disputes and record-large South American crops, weigh heavily on the outlook for grain and oilseed prices in 2025,” CoBank reported. “U.S. 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. The bearish outlook for oil prices diminishes the demand picture for ethanol, biodiesel and renewable diesel. Uncertainty over U.S. biofuel policy under the new administration also clouds the demand outlook for biofuels.”

“Falling feed costs and rising producer margins have renewed expansion interest in animal protein segments,” CoBank reported. “However, labor, construction and land costs remain elevated, tempering expectations for any meaningful supply growth in the near term. U.S. beef cow herd expansion is not expected to start until 2026 or 2027. The smaller herd will further support higher feeder and fed cattle prices in the coming year. With consumers now pushing back on beef prices already near historic highs, packer margins will remain under pressure well into 2025.”

Global Outlook Uncertain, Too

Meat+Poultry’s Arvin Donley reported this past week that “the prospect of new tariff disputes following Donald Trump’s return to the presidency in the United States, ongoing geopolitical tensions and continued climate change-related challenges are expected to significantly impact agricultural trade and producer profitability worldwide in the upcoming year, according to a recently published Rabobank report.”

“The global economic landscape in 2024 has been shaped by falling inflation and moderate economic expansion,” Donley reported. “However, (Carlos Mera, head of Agri Commodity Markets Research at Rabobank) said, ‘the implementation of US tariffs would raise the risk of fragmenting global trade and financial flows, potentially also affecting the availability of US dollars in the rest of the world. Developing nations with high dollar-debt exposure could be particularly at risk. In principle, a strong dollar means lower prices for all dollar-denominated commodities.’”

“The war between Russia and Ukraine, which has been fought mostly on Ukrainian soil since February 2022, is starting to take a toll on the country’s ability to produce and ship grain, the report said. Despite the ongoing war, Ukraine has managed to continue exporting agricultural commodities via its Black Sea corridor,” Donley reported. “The corridor, which hugs the western coast of the Black Sea, has been remarkably successful, allowing Ukraine to continue shipping its exportable surplus. However, the country faces significant challenges, including labor shortages, adverse weather, and low stock levels at the start of the current export season, Mera said.”

“Long-term climate change trends will (also) continue to affect agricultural productivity, with varying impacts on different crops and regions, Rabobank said,” according to Donley’s reporting. “Warmer temperatures are lengthening growing seasons in northern regions, leading to higher yields, while negatively impacting production in low latitudes. Future projections indicate strong negative effects on corn yield, while wheat may benefit from higher CO2 concentration levels and expanded planting area in high-latitude regions, with potential yield gains, the report said.”

Economists Highlight Some Positives

AgWeb’s Tyne Morgan reported this past week that “at the end of 2024, what are economists watching in 2025? In Farm Journal’s latest Ag Economists’ Monthly Monitor, we asked economists: ‘What’s the one factor impacting the ag economy that’s not being talked about or covered by the media enough right now?’”

One economist said “the media seems consumed with the negatives of a Trump administration/Republican trifecta. It’s certainly good to be aware of the challenges with any political transition, but more forward thinking on what is positive, would be helpful: the outlook for taxes, biofuels policy, trade deals with agriculture included, deregulation all seem to be potential positives we could be talking about more.”

Another said that “China, Europe, Mexico and others know what to expect out of Trump. They’ve seen it before. Everyone is discounting the possibility that Trump’s tariff threat could result in some preemptive trade agreements that benefit us here in the states. The U.S. is the biggest buyer of consumer goods in the world. They can’t afford to cut us off. Note that I said consumer goods, not commodities.”