Cover of the 2025 report on U.S. rural economy and agriculture trends | CoBank
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. So, where does that leave the U.S. ag economy heading into 2025?
The CoBank 2025 outlook report examines several key factors that will shape agriculture and market sectors that serve rural communities throughout the U.S. Here are a few.
U.S. Economy: A New Economic Era Begins
Most economists are forecasting 2025 U.S. GDP growth of around 2.5% to 3.0%, essentially the same as today. However, those forecasts are based on rather mild assumptions about forthcoming policy changes. When taken in isolation, President-elect Trump’s proposed policies — tax cuts, decreased labor supply, and tariffs on imported goods — are all inflationary. Consequently, longer-term interest rates have already edged higher, and the market has downshifted expectations for further Fed rate cuts in 2025. There is a good chance the proposed tariffs and the crackdown on undocumented immigrants will be more disruptive than markets have priced in, particularly in industries like construction and agriculture.
U.S. Agricultural Economy: Trade War Could Send Ag Economy from Bad to Worse
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. But production costs have remained elevated, and profitability has plunged to decade-plus lows. 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.
Food and Beverage: Health and Nutrition Take Center Stage
The headline news for food, beverage, and consumer packaged goods in 2025 is President-elect Trump’s nomination of Robert F. Kennedy Jr. to lead the Department of Health and Human Services. Kennedy’s purported goals include eliminating ingredients banned in other countries and “getting the chemicals out” of America’s food supply. Meanwhile, consumers’ renewed focus on their health and the popularity of GLP-1 weight-loss drugs are showing signs of impacting food manufacturers. GLP-1 users purchase around 8% less food compared with average consumers, according to J.P. Morgan research. Food and beverage manufacturers’ concerns about volume attrition are likely to continue well into 2025.
Digital Infrastructure: Rural Connectivity Faces New Challenges
Political uncertainty and low participation in the Broadband, Equity, Access, and Deployment program raises big questions for bridging the digital divide in the year ahead. The $42.5 billion BEAD program, created by the Infrastructure Investment and Jobs Act, 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. Many small operators lack the specialized expertise or financial resources to meet some of the complicated BEAD requirements.
This is just a sampling of CoBank’s report on factors that could shape the U.S. ag economy in 2025. You can view the report in its entirety at CoBank.com.
