The outlook for the rural economy is more volatile and uncertain heading into 2025 than the general economy, according to a year-ahead outlook report from CoBank’s Knowledge Exchange.
The report notes the high level of policy uncertainty facing rural industries adds to an already long list of headwinds and challenges, according to a news release.
“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,” he added. “Depending on how policy plays out, those two areas could be big challenges in 2025 and beyond.”
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, the report said.
The CoBank 2025 outlook report examines several key factors that will shape agriculture and market sectors that serve rural communities throughout the U.S.
Most economists are forecasting 2025 U.S. gross domestic product growth around 2.5% to 3%, essentially the same as today. However, those forecasts are based on rather mild assumptions on forthcoming policy changes, the release said.
“When taken in isolation, President-elect Trump’s proposed policies — tax cuts, decreased labor supply and tariffs on imported goods — are all inflationary,” the release said.
The report said 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, the report said.
Congress is expected to wrap up the lame-duck session of the 118th Congress by Dec. 19, and a one-year extension of the 2018 farm bill is increasingly likely. 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 significant deportation efforts and immigration reform, implementation of tariffs, extending the 2017 tax cuts and providing regulatory relief rolling back the Biden administration’s initiatives.
The 119th Congress will have a long and challenging to-do list when members return to Washington on Jan. 3, the release said.
The short-lived commodity boom precipitated by global droughts, the war in Ukraine and COVID-19 supply issues is now a distant memory, the report said.
“Row crop prices are down nearly 50% from their 2022 highs,” the release said. “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.”
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,” the release said.
“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,” the report said. Kennedy’s purported goals include eliminating ingredients banned in other countries and “getting the chemicals out” of the U.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.
Related link: Read the full year-ahead outlook report from CoBank’s Knowledge Exchange
