WILLAGRI
While the outlook for the U.S. economy in 2025 is generally robust, the same cannot be said for agriculture. According to CoBank, the political uncertainties stemming from Trump’s election are likely to exacerbate the traditional challenges faced by American agriculture.
Although the new administration has yet to clearly define its policies, statements from future officials suggest increased difficulty in accessing export markets and in recruiting foreign workers.
The fleeting boom in commodity prices caused by global droughts, the war in Ukraine, and supply chain disruptions due to COVID-19 has become a distant memory. Prices for major crops have dropped by 50% compared to their 2022 peak, while production costs have remained high, driving profitability to its lowest level in a decade.
On a positive note, livestock and dairy production have remained profitable thanks to low feed costs and resilient demand. However, overall, the upcoming Trump administration is expected to create headwinds detrimental to agriculture and livestock farming. Trump’s election victory was largely driven by two key promises: high tariffs on imports and the expulsion of undocumented workers. Both measures are likely to have negative consequences for the U.S. economy.
Margin Compression
CoBank also predicts that a stronger U.S. dollar, combined with the risks of trade conflicts and record harvests in South America, will significantly depress the prices of grains and oilseeds in 2025. U.S. farmers anticipate shrinking profit margins and an inability to reduce production costs.
Industrial inputs may also suffer due to bearish oil price trends, potentially leading to reduced demand for ethanol, biodiesel, and renewable diesel. The uncertainty surrounding agricultural policy under the new administration further clouds the outlook for biofuel demand.
While declining feed costs and higher production margins have renewed interest in animal protein production, high labor, construction, and land costs dampen hopes for significant supply growth in the short term.
The global economic landscape has been characterized by declining inflation and moderate economic expansion. However, imposing high tariffs would increase the risk of fragmentation in global trade and financial flows, affecting the availability of U.S. dollars worldwide. Developing countries with dollar-denominated debt are particularly vulnerable. Historically, a strong dollar has depressed the prices of all dollar-denominated commodities.
Trump I’s Agricultural Policy
Climate change will continue to impact agricultural productivity, with varying effects depending on crops and regions. Projections suggest negative impacts from warming on corn yields, while wheat could benefit from increased productivity.
However, some economists remain optimistic about the potential effects of Trump’s policies on agriculture, citing factors such as favorable policies, support for biofuel production, deregulation, and international trade agreements.
The effects of Trump I’s policies are well-documented. For instance, increased tariffs on Chinese goods triggered retaliatory measures from Beijing, affecting U.S. exports of corn, soybeans, and pork. This U.S. trade policy created price volatility, preventing American farmers from effectively planning their production.
The trade war prompted Washington to offer financial compensation to farmers impacted by the tariff battle. Meanwhile, Trump’s deregulation policies granted farmers greater flexibility, often at the expense of environmental concerns.
Trade agreements such as the USMCA (United States-Mexico-Canada Agreement) benefited U.S. exports, while others had more mixed results.
Encouraging the adoption of new agricultural technologies yielded uneven outcomes due to limited access to financing.
While Trump II’s policies have created complex effects, Trump I’s administration left a legacy of significant uncertainties for agriculture.
Source: Successful Farming