CoBank economists are forecasting a year of uncertainty and volatility for the U.S. agricultural economy in 2025 amid an administration change in Washington. The “2025 Year Ahead” outlook report from CoBank’s Knowledge Exchange says policy uncertainties will add to an already long list of headwinds and challenges facing rural industries.
“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.”
Below are some key highlights from the report and the forces that CoBank sees shaping the U.S. ag economy in 2025. The full report is HERE:
Possible Trade War and Reduced Immigration Could Further Threaten Ag Economy: CoBank’s Fox warns that a trade war could send the U.S. ag economy from bad to worse, while an immigrant crackdown could create intermittent labor shortages in key industries (dairy, meatpacking, and produce). Fox says that, in theory, President-elect Donald Trump’s policy proposals “could achieve some limited objectives (i.e. protection for industries key to national security and higher wages for low-skill workers), but it is very hard to paint them as anything but negative for the U.S. farm economy.”
Fox highlights a recent joint study by the national corn and soybean associations that estimate the 2018-19 trade war cost the U.S. a total of -$27 billion in agricultural sales to China over those two years. 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. Since then, China has turned to other suppliers for its food needs, primarily Brazil.
U.S. exporters have turned to Mexico to fill lost sales to China, making our southern neighbor the largest U.S. export market in 2024. However, Fox notes that President-elect Trump has recently targeted Mexico and Canada, threatening 25% tariffs on day one of his administration. Mexico, Canada, and China combined account for over half of the value of all U.S. agricultural exports. “Brazil, Russia, Australia, Argentina and others are gearing up to supply our global agricultural customer base – and this is no exaggeration,” Fox warns.
Strong Dollar, Policy Uncertainty, and South American Crops to Hobble U.S. Exports: 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, according to Tanner Ehmke, CoBank Knowledge Exchange lead Economist for Grains and Oilseeds. Ehmke explains that economic woes in the U.S.’s top grain and oilseed export markets – Mexico and China – raise concern over their ability to import grains and oilseeds as their currencies weaken against the U.S. dollar. Additionally, foreign customers that front loaded grain and oilseed purchases from the U.S. ahead of a potential trade war under the new administration are also carrying greater inventories, thereby implying fewer imports in the future.
Ehmke says that export competition is also growing. A weakening of Russia’s currency, the ruble, is expected to anchor global wheat prices as Russian wheat offers become more competitive. However, persistent drought conditions in the key wheat-producing regions in Ukraine and Russia offer potential for market volatility in wheat prices. In Brazil – the U.S.’s top export competitor for corn and soybeans – the expected continued weakening of the Brazilian real will make exports from Brazil cheaper versus U.S. origin.
Assuming normal weather through the growing season, South America is expected to produce record corn and soybean crops and record exports. Growing crush capacity in South America also implies more export competition for soybean meal and oil. Ehmke believes U.S. farmers will be incentivized to shift some soybean acres to corn as the global abundance of soybeans weighs on soybean values relative to corn.
Biofuels Production May Slow as Policy Uncertainty Looms: CoBank’s Jacqui Fatka, Lead Economist for Farm Supply and Biofuel, says the biofuels sector faces several headwinds in 2025 from political and regulatory uncertainty. At the same time, the sector could continue to see tailwinds from strong exports and higher biofuel mandates from foreign countries.
Fatka says the Trump administration is not apt to quickly propose new 2026-29 renewable volume blending obligations in the Renewable Fuels Standard but instead wait for actions on pending small refinery exemptions (SREs). Under the Biden administration, the EPA did not approve any SREs, and instead denied 79 requests. Now the EPA will need to look at those earlier denials and more, totaling 129 exemption petitions from 2018 and later.
Another issue that has hindered expansion was EPA’s underestimation of biomass-based diesel production capacity in the 2023-25 “set rule.” The oilseed industry has criticized EPA for setting the blend levels too low, despite the $6 billion in investment to build out domestic crush capacity. In 2024, additional blending of soy oil and imported tallow and used cooking oil pushed levels above mandated volumes. Tariffs or regulatory action could limit the imports of UCO and tallow, as well as the domestic build out of renewable fuels in China and Brazil where these imported oils originate.
Potential benefits to the growing sustainable aviation fuel (SAF) market are being limited by a short tax credit runway for the Inflation Reduction Act’s 45Z Clean Fuel Production Credit (designed to encourage the production of domestic fuels) as well as delayed regulatory guidance and uncertain political actions. California’s 20% limit on vegetable oil feedstocks in its low carbon fuel standard puts downward pressure on the use of soy and canola oil in RD production.
On a positive note, Fatka says that expanded renewable blending requirements around the world are helping build global demand. U.S. ethanol exports set new records in 2024 with Canada taking over as the top destination. However, the impact of potential tariffs on world trading partners and retaliatory tariffs on U.S. agricultural products, including ethanol and DDGs, could limit ethanol export growth. Brazil’s increasing corn production has supported the growth of domestic corn ethanol facilities, which may increase ethanol competition in the world market.
Rising Margins to Fuel Livestock Growth: Brian Earnest, CoBank Knowledge Exchange Lead Economist of Animal Protein, and Abbi Prins, Industry Analyst, highlight the economic boom that lower feed prices are having on the livestock industry. Feed, which accounts for roughly half of livestock expenses, have tumbled from record levels over the last two years, helping renew interest in animal protein production growth. At the same time, labor, construction, equipment, land, and cost of funds remain elevated, complicating expectations.
As a result of a volatile market and poor pasture conditions, Earnest and Prins forecast U.S. beef cow herd expansion will not start until 2026 or 2027. The shrinking herd will further support higher feeder and fed cattle values, and the analysts say it would not be surprising to see fed cattle values eclipse $200/cwt. in the coming year.
The CoBank analysts note that Mexico is a top destination for U.S. poultry and pork and is a source of cattle for U.S. feedlots as pasture conditions worsen south of the border. They further stress that a good working trade relationship with Mexico remains vital on many fronts. Over the past 30 years, U.S. pork exports to Mexico grew +1,560% to 2.6 billion pounds, and chicken exports grew +624% to 1.6 billion pounds.
