Another Down Year for Agriculture
Farmers brace for falling incomes, widening trade deficits.
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2025 will be another down year for farmers. Farm income will decline for the third year in a row, with lower prices for crops and poultry outweighing higher livestock prices and a moderation in production expenses, such as fertilizer, and more. Plus, the industry faces numerous risks, particularly in the areas of trade and immigration.
1. Farm income
Net farm income will fall to $129 billion in 2025, down 6% from last year and 29% from 2022’s record of $182 billion. The main culprit: A decline in cash receipts for major staple crops, particularly for oilseeds like soybeans (down 6.9% from last year and 17.8% from 2022). Cheaper grains like corn are good for livestock producers, whose herds have shrunk in recent years because of higher costs. Livestock cash receipts will fall 2.3% from last year, but are actually up compared with 2022 levels.
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Production expenses will also decline, with farmers paying less for key inputs like fertilizer and pesticides, and interest rates having eased. That will help take some of the sting off.
Expect the U.S. agricultural trade deficit to continue growing this year, surpassing $45.5 billion, mainly due to weaker prices and shipments of soybeans, for many years the largest U.S. agricultural export by value ($27.7 billion in 2023).
2. Trade tariffs
The Trump administration has trade beefs with China, Canada and Mexico, the three largest destinations for U.S. agricultural exports. The new president has threatened to impose tariffs on all three countries as soon as next month, raising the cost of imports and inviting retaliatory duties on U.S. farm products.
Officials and farmers hope that the tariffs prove an effective negotiating tool, as was the case in a recent dustup between the U.S. and Colombia over immigration. But Trump also seems willing to impose duties while negotiations are under way.
3. Immigration
The president’s immigration crackdown could also have consequences for agriculture. Nearly 13% of the industry’s workforce is undocumented, second only to construction, with agricultural visa programs failing to keep up with demand. As with trade, Trump seems serious about following through on his pledges, unleashing a flurry of immigration-related executive orders in his first days on the job.
4. Bird flu
Another wild card: The ongoing outbreak of avian flu, which has affected more than 138 million commercial birds and has started spreading to humans. Even if the current outbreak doesn’t become a more worrisome pandemic, it will still have a pronounced effect on consumer pocketbooks.
Grocery prices are expected to increase by 1.3% this year, according to the Department of Agriculture, compared with 1.2% last year and 11.4% in 2022. Egg prices will buck the trend, growing by 20.3%, and representing yet another upside risk to U.S. grocery bills.
This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.
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