CoBank report examines forces that will shape the U.S. rural economy in 2025

CoBank report examines forces that will shape the U.S. rural economy in 2025 Agriculture faces a long list of challenges in ‘The Year Ahead’

While the U.S. continues to benefit from solid economic growth, low unemployment and moderating inflation, the outlook for the rural economy is more volatile and uncertain in 2025 and beyond. The outcome of the 2024 election 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 “The Year Ahead” report by CoBank’s Knowledge Exchange, these uncertainties facing rural industries adds to an already long list of challenges. 

“The environment we’re entering hasn’t yet fully defined itself, 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 the Knowledge Exchange for CoBank, a cooperative bank serving agri­businesses such as MFA. “Open access to export markets and labor availability are critically important for agricultural producers and processors, and those areas could be big challenges in 2025 and beyond.” 

Released in mid-December, the CoBank 2025 outlook report examines these and other key factors that will shape agriculture throughout the U.S. 

New administration, new Congress

President Trump is expected to pursue an ambitious first-100 days of executive orders and other legislative activity that will likely include many of his campaign promises. These may include deportation efforts and immigration reform, implementation of tariffs, extending 2017 tax cuts and providing regulatory relief by rolling back Biden administration initiatives.

Trade war threats

Row-crop prices are down nearly 50% from 2022 highs, but production costs remain 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 favorable consumer demand. However, President Trump’s campaign proposals on tariffs, immigration and deportation could be negative for the U.S. farm economy.

Policy uncertainty on exports, biofuels 

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. Weaker commodity prices will continue to squeeze farm income, and cropping decisions will likely be evaluated much more closely with a focus on inputs that provide the greatest return on investment. Uncertainty over U.S. biofuel policy under the new administration also clouds the demand outlook. 

Rising margins in animal agriculture 

Falling feed costs and rising producer margins have renewed expansion interest in animal agriculture. However, labor, land and construction costs remain elevated, tempering expectations for meaningful near-term supply growth. The U.S. beef cow herd expansion is not expected to start until 2026 or 2027, further supporting higher feeder and fed cattle prices in 2025.

Record investment in dairy

The U.S. will see an unprecedented $8 billion in new dairy processing investment through 2026. Some of the new plants are poised to come online in 2025, with about half of the investment in the cheese category. The expected surge in cheese and whey output will likely put downward pressure on dairy product prices in the second half of the year. Sourcing additional milk supplies to fill new plant capacity is a looming question.

New challenges for rural connectivity

Political uncertainty and low participation in the Broadband, Equity, Access and Deployment (BEAD) program raises big questions for bridging the digital divide in the year ahead. The $42.5 billion BEAD program includes an unprecedented level of government support. However, a lack of operator participation could blunt the impact of this well-intended program to bring reliable broadband access to underserved rural areas. 

Read the full report online at bit.ly/CoBankYearAhead2025.

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