California Ag Network

Tag: CoBank Knowledge Exchange

  • Demand for Chicken Keeps Climbing, Can Broiler Production Keep Pace?

    The U.S. chicken industry is on a decades-long winning streak. Steady growth in consumer demand coupled with efficiency gains in broiler production have powered the sector’s remarkable growth over the last 30 years. However, an emerging set of challenges could put that track record of consistently reliable growth in jeopardy. A slowdown in new processing plant construction —  combined with the inherent limitations of existing production systems and an undersupply of chicks — could ultimately hinder processors’ ability to maintain recent growth trends.

    According to a new report from CoBank’s Knowledge Exchange, the near-term outlook for broiler production remains exceptionally strong. But the opportunities for increasing output are becoming more limited. Higher capital costs, tight labor availability and increased local regulation have stalled greenfield site expansion. Chick availability has trended downward as genetic priorities have shifted from hatchability to meat yield, and adding more pounds per bird has its limits.

    “The potential long-term challenge becomes how big is too big for birds on the processing line, and what will drive consumer preferences for chicken products into 2030 and beyond,” said Brian Earnest, lead animal protein economist with CoBank. “In the short-term, there has been a growing interest in secondary processing or the value-add segment. That’s helping chicken producers meet increased consumer demand for further processed and flavor-enhanced items like tenders, nuggets and sandwiches. But it’s not necessarily a sustainable or long-term approach to consistently increase overall production volume.”

    Annual per capita chicken consumption in the U.S. has increased 30 pounds since 1995 and currently stands at 103 pounds, according to USDA data. That number is projected to rise to 107 pounds by 2030, which far exceeds U.S. per-capita consumption of beef and pork. The steady increase in demand led chicken processors to focus on increasing meat yield and efficiency. Broiler genetics companies responded by shifting away from an emphasis on hatchability, or how many chicks a hen could produce, to feed conversion efficiency which promotes larger birds and higher meat yields.

    With the change in genetics, producers are now able to achieve more than 1,000 pounds of chicken from a single egg-laying hen. That’s a 17% increase since 2005. While the shift in genetics enabled processors to increase broiler meat yields, those gains have come at a cost. Fewer chicks are available to raise for broiler production. That limits the opportunity to increase production by adding birds into the system. The trend of lower hatchability could be reversed, but it would take several years before genetic changes improve chick availability.

    Jumbo birds, value-added products driving current growth and investment

    The overall chicken product mix available to consumers today barely resembles what it did 30 years ago. Back then, whole birds and other raw pieces comprised the bulk of consumer purchases. Today, the further processed segment makes up nearly half of all chicken marketed in the U.S. The jumbo bird format works well with chicken marketing plans that include new product innovations focused on portion-sized convenience and more exciting flavor options in products like strips, nuggets and tenders.

    Earnest said the elevated costs associated with new greenfield expansion will limit the addition of meaningful head count in the near future, and short term growth will be facilitated by larger birds and continued investments further processed capabilities. “Relying on efficiencies in per-bird production will require flexibility and technology. For processors, that means line speed efficiency will be paramount to grow production until such time more birds can be added to meet steady growth in demand.”

    Watch a video synopsis and read the report, U.S. Chicken Doubles Down on Value-Add to Meet Demand.

    About CoBank

    CoBank is a cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving more than 79,000 farmers, ranchers and other rural borrowers in 23 states around the country. CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture, rural infrastructure and rural communities. Headquartered outside Denver, Colorado, CoBank serves customers from regional banking centers across the U.S. and also maintains an international representative office in Singapore.

  • Can Large-Scale Solar Installations Coexist with Ag in Rural America?

    Local opposition to utility-scale solar installations in rural areas is growing following the rapid pace of new solar developments in recent years. Concerns about land use in areas largely dominated by agricultural production are fueling much of the community-level resistance. With crop production revenue currently under intense pressure and subject to annual volatility, some landowners are welcoming the more consistent revenue advantages of solar land-lease payments. But wider opposition could stymie additional solar developments in rural areas, slowing growth in the U.S. energy supply.

    According to a new report from CoBank’s Knowledge Exchange, solar expansion could deliver the fastest, most affordable means for increasing the nation’s razor-thin energy reserves while driving new revenue streams for rural communities. However, success will be dependent on regional policy and site planning guidelines that ensure the local communities’ needs and interests are prioritized. The report is the first in a series of upcoming research articles and part of The New Golden Age of Electricity digital hub about rising energy scarcity and securing future power supply for rural America.

    “Concerns surrounding the pace of solar developments in rural areas and the implications for land use in agricultural regions are warranted,” said Teri Viswanath, lead power, energy and water economist with CoBank. “But there are guardrails to reduce the risk of land use tensions and other conflicts that would enable landowners and rural communities to capture the financial benefits of solar projects without displacing or disturbing agriculture farmland.”

    Growing resistance to solar installations in rural communities is likely in response to the speedy development that has already taken place and concerns about what future construction might look like. More than one-half of all U.S. solar installations have materialized since 2020, with 25% of that development occurring since the passage of the Inflation Reduction Act in 2022.

    Solar energy generation can be installed at a rate five times faster than all other new electricity sources combined and remains the lowest cost solution to expanding energy supplies, even without government subsidies. While federal policy has recently become much less supportive of renewable energy and tax credits are now limited, the costs of solar development remain favorable. The biggest headwind for expanding solar energy production is local opposition.

    A recent analysis by USA TODAY found that around 15% of counties in the U.S. have some form of restriction on building new utility-scale solar energy projects. This includes outright bans, zoning restrictions, specialized land-use rules or political stonewalls. At least 395 local restrictions across 41 states, in addition to 19 state-level restrictions, are so severe that they effectively block renewable development in these areas.

    In rural areas, solar development occurring on prime farmland has had an outsized negative influence from the community perspective. To rectify that trend, American Farmland Trust and the American Farm Bureau have recommended a set of guardrails that would prevent the solar industry from siting developments on prime agricultural land. Those recommendations include prioritizing solar power on shared agricultural land or marginal and brownfield sites, offering a more acceptable pathway for rural communities and landowners to capture the benefits of tax revenue and lease payments. The report also notes that economies of scale and high costs are major reasons why simply installing solar on existing rooftops is not a feasible answer.

    Successful efforts to balance local community interests with solar development have the potential to pay off handsomely. According to data collected by the American Clean Power Association, a recurring $739 million came back to communities last year in the form of state and local taxes and land-lease payments.

    “Regardless of the pace of solar development ahead, future installations will inevitably affect local communities so more engagement from the solar industry is needed,” said Viswanath. “Strengthening partnerships with agricultural stakeholders and implementing effective land management strategies will be critical to mitigating challenges and gaining acceptance. Solar power is essential for meeting near-term demand growth, and rural America can play a key role in this while diversifying farm income and benefiting local communities through additional tax revenue.”

    Read the report, Reassessing Solar Power’s Contribution.

    About CoBank

    CoBank is a cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving more than 78,000 farmers, ranchers and other rural borrowers in 23 states around the country. CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture, rural infrastructure and rural communities. Headquartered outside Denver, Colorado, CoBank serves customers from regional banking centers across the U.S. and also maintains an international representative office in Singapore.

  • Tariff Policy, Declining Immigration and Massive AI Investments Cloud US Economic Outlook

    Significant downward revisions to monthly payroll estimates in August led many market observers to anticipate the Federal Reserve would begin cutting interest rate cuts more aggressively. However, recent economic data has generally been positive, tempering expectations for more significant cuts before the end of the year.

    According to a new quarterly report from CoBank’s Knowledge Exchange, the most likely scenario is an additional four or five cuts of 25 basis points through 2026, leaving the overnight rate around 3.0% by the end of 2026. The actual outcome will depend heavily on how the economic data looks and how successful the White House is in influencing monetary policy.

    Tariff policy uncertainty, the sharp decline in immigration and the massive surge in AI investments have made interpreting traditional economic reports more difficult. The CoBank report suggests sharp swings in monthly import volumes, a flattening of working-age population growth and a soaring stock market make it difficult to gauge how “Main Street” America is doing economically.

    “The intense politicization of attitudes has rendered longstanding public sentiment surveys erratic and unhelpful in gauging actual economic conditions,” said Rob Fox, vice president of CoBank’s Knowledge Exchange. “The federal government shutdown and potential loss of scheduled economic reports will make it even more difficult for businesses to gauge the economy and make prudent business decisions.”

    Despite rising fears that the rapid adoption of AI will soften the labor market and dim job prospects for college graduates, Fox said there is little evidence to support those fears. “New technologies have always raised concerns about job losses. The recurring theme is job transformation, not elimination. This time isn’t any different. Today’s college graduates are already deeply familiar with AI and are using it to sharpen skills hiring managers value most.”

    U.S. Economy

    Personal consumption and unemployment rates, arguably the most important economic signals, have held steady in the face of ongoing uncertainty. However, other signs suggest the economy may be slowing. Personal income growth, adjusted for inflation, has fallen from 4% in early 2024 to about 2% today. Consumers have responded by dipping into savings to maintain their spending, which cannot be sustained indefinitely. While a potentially slowing economy and declining interest rates should put downward pressure on the dollar, the effect for U.S. agricultural exports has been muted. Row crop exports have not experienced the benefit of the weakening dollar relative to the currencies of America’s largest grain importers.

    U.S. Government

    The government shutdown and lack of congressional action are contributing to widespread political and economic uncertainty. With no more funds to support most federal programs or pay many public servants, the suspension of most revenue-generating capabilities are halted and will likely negatively impact the economy as time goes on. Meanwhile, the abundance of American agricultural commodities is no longer an asset but rather a liability for many U.S. farmers. Tariffs have ultimately shut out American commodities to many countries. The administration is expected to announce $10 billion-$15 billion in farm aid to struggling producers but that may be delayed because of the government shutdown.

    Grains, Farm Supply & Biofuels

    U.S. farmers are harvesting a record-large corn crop and the second-largest soybean crop in five years following the largest wheat harvest in five years. The supply abundance is welcomed news for grain elevators looking to capture bigger carries in the futures market. But the record grain crop will strain U.S. storage and transportation infrastructure. The demand outlook for U.S. grains remains clouded by geopolitical uncertainty. Corn and wheat sales enter the fourth quarter historically strong, but soybean sales are abysmal due to the lack of Chinese purchases. Low water levels on the Mississippi River threaten to slow grain and oilseed exports during the peak shipping season.

    Elevated crop input costs will further erode producer profitability during the current low commodity price cycle. Producers will likely reduce fall fertilizer applications and stall overall input purchases for 2026 due to higher prices. Tariffs are also driving up input costs. The average tariff on crop inputs imported to the U.S. has increased from 1% to nearly 12%, according to data published by North Dakota State University. Fertilizer prices remain the biggest headwind for producers. Farmers will be reassessing and potentially reducing their usage rates of nitrogen, phosphorus and potassium. If farmers shift more applications to the spring, high seasonal demand could lead to supply chain hiccups.

    Biofuel demand remains a silver lining for the crop side of the agricultural economy. But the delay in regulatory policy on renewable volume obligations and small refinery exemption reallocation are casting a cloud over future demand. The EPA is unlikely to finalize next year’s renewable volume obligations before 2026. Renewable diesel and biodiesel margins will stay in the red as producers work through the long transition from the Blenders Tax Credit to the 45Z Tax Credit. Ethanol producer margins should remain positive to close out the year, due to plentiful corn supplies and low prices for natural gas and corn.

    Animal Protein & Dairy

    Dollar sales of retail ground beef grew by double digits in August, up 13% year-over-year at $1.7 billion, according to Circana. While beef prices remain elevated on tight cattle supplies, persistent demand boosted overall sales, and volume kept pace. Domestic cattle prices rose throughout much of the third quarter, setting new records and boosting returns to ranchers, but complicating beef market dynamics otherwise. Beef packer margins struggled during the third quarter. Despite strong demand for beef, several factors are limiting production growth.

    A slimming U.S. hog herd served to lift market prices. Price rallies for lean hog futures and feeder pigs persisted over the summer, settling at 20% and 48% higher year-over-year, respectively, in late September. In August, farrow-to-finish profit margins reached $52.58 per head, the highest since June 2021, according to Iowa State University. Pork producers have now posted profits for 17 consecutive months. Export demand has slowed slightly compared to 2024, which was a record export year for U.S. pork. Mexico remains the largest buyer of U.S. pork.

    With beef prices hitting all-time highs, the U.S. broiler segment capitalized on the opportunity to provide consumers a value offering this summer. A strong focus on chicken at retail and foodservice boosted white meat values through August. The quick-service restaurant segment featured a multitude of chicken options focused on strips and new flavors. Softening white meat values during the remainder of the year are likely to crimp margins but will continue to position chicken as a competitive value offering in 2026. Broiler production is expected to remain elevated through the end of 2025.

    U.S. dairy farmers continue to enhance their revenue by producing calves destined for beef production. Beef’s contribution to the bottom line has moved from $1 to $4 per cwt. over the past four years. The U.S. dairy herd has climbed to its highest level in over 30 years, in part, to capitalize on revenue from beef-on-dairy calves. While milk production margins had been somewhat favorable, strong output in recent months significantly changed the price forecasts. Butterfat production is in overdrive and ample supplies have sent milk futures lower. Typically, that would prompt dairies to reduce production. But the combination of the lowest feed prices in five years and profit margins for beef may be a stronger signal.

    Cotton, Rice & Sugar

    Cotton prices remain depressed despite a smaller U.S. crop. A slowing global economy continues weighing on clothing and apparel sales, pushing cotton prices lower. U.S. cotton exports have languished amid the weakening economic outlook. Cumulative U.S. export commitments of upland cotton were down 18% year-over-year as of mid-September. The slouching export pace is a concern for U.S. cotton farmers, as 80% of the cotton crop is typically exported. USDA estimates the 2025/2026 cotton crop at 13.22 million 480 lb. bales, falling 8% year-over-year.

    Rice prices continue to suffer from downward global pressures. Ample global supplies of competitively priced rice have eroded U.S. export market share. U.S. rice export sales are down 26% year-over-year since India resumed rice exports in 2024. Increased export competition from South America into the key Western Hemisphere market has added to the global headwinds. Stronger sales of medium-grain rice to Japan and Korea have been a bright spot in U.S. rice trade. While U.S. tariffs on imported rice have offered some support to U.S. prices, global rice abundance threatens to hold prices at multi-year lows.

    Strong global sugar supplies have pulled prices lower just as the U.S. sugar beet and sugarcane harvest is underway. Total U.S. sugar production is expected to rise 1.8% year-over-year. The bigger U.S. crop arrives amid a global sugar crop that will be biggest in eight years. Major exporters including Brazil, Thailand and India have expanded production. The global abundance continues to anchor U.S. sugar prices, which fell to their lowest level in four years last quarter. However, biofuel policies in India may limit future sugar exports, putting a stronger floor under U.S. and world sugar prices.

    Food & Beverage

    Merger and acquisition activity in the food and beverage sector continues, as evidenced by marquee deals including Ferrero’s acquisition of WK Kellogg and Mars’ purchase of Kellanova. However, deconsolidation and divestures are becoming equally common. Unraveling the biggest deal of a decade ago, Kraft Heinz is splitting into two companies. The move reflects a growing trend toward deconsolidation as companies aim to focus their efforts more narrowly and increase their agility to address changing consumer needs. This trend will likely continue as consumer sentiment shifts toward more cost-effective, at-home meal solutions.

    Power & Digital Infrastructure

    The cost of electricity is becoming a chief economic concern for Americans as prices are rising twice as fast as inflation. While data centers’ enormous appetite for power is frequently assigned blame, the problem of rising electricity prices pre-dates data centers. The North American Electric Reliability Corporation has long warned of supply challenges. Large load growth customers such as data centers could be a catalyst for modernizing the U.S. electric grid, ultimately helping to lower rates for all customers. However, regulatory misalignment or the mis-apportionment of system costs could deter the beneficial load growth needed to temper electricity costs. The imperative for utilities is to insulate consumers from data center cost sharing.

    Historic investments continue pouring into data center and AI infrastructure development. Capital expenditures could approach $400 billion in 2025, up from $235 billion in 2024. Investments will surge even higher in 2026, with Oracle, Microsoft and Broadcom signaling continued growth in AI infrastructure. That momentum creates a unique opportunity for rural America, as data center developers and hyperscalers search for land and a clear path to power. But the road ahead is not without challenges. The looming supply-demand imbalance in U.S. energy markets could become a bottleneck for growth and increase the risk of critical AI training activities migrating overseas.

    Read The Quarterly. Each CoBank Quarterly provides updates and an outlook for the Macro Economy and U.S. Agricultural Markets; Grains, Biofuels and Farm Supply; Animal Protein; Dairy; Cotton and Rice; Specialty Crops; Food & Beverage industries and Rural Infrastructure.

    About CoBank

    CoBank is a cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving more than 78,000 farmers, ranchers and other rural borrowers in 23 states around the country. CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture, rural infrastructure and rural communities. Headquartered outside Denver, Colorado, CoBank serves customers from regional banking centers across the U.S. and also maintains an international representative office in Singapore.

  • Mexico Poised to Become Top Destination for US Ag Exports

    U.S. food and agricultural exports to Mexico have surged 65% over the past four years, making it the fastest growing export market for a host of American agricultural commodities and products. Mexico’s growth as a destination for U.S. exports has been spurred by the country’s booming post COVID-19 economy and a rapidly growing manufacturing sector.

    The economic upswing has allowed Mexican consumers to expand their traditional diet, and U.S. food and agricultural producers are helping meet the country’s growing demand for meat, poultry, dairy, processed foods and feed grains. In 2024, U.S. food and ag exports to Mexico climbed to $31.4 billion, slightly below Canada, the top market at $32.4 billion.

    According to a new research brief from CoBank’s Knowledge Exchange, Mexico will likely surpass Canada to claim the top spot for the first time in 2025 despite some emerging headwinds.

    “The rise of Mexico as a customer has been a huge success story for U.S. agriculture,” said Rob Fox,  director of CoBank’s Knowledge Exchange. “But a few risk factors are developing that could slow the pace of additional growth. Mexico’s economy has been slowing, and the unusually strong peso over the last couple of years has weakened by about 15% since early 2024. Mexican consumers’ purchasing power will be more challenged in 2025.”

    Since 2020, Mexico’s share of all U.S. agricultural exports rose from 11.2% to 16.4%. On a volume basis, corn, pork, dairy products, soybeans and poultry products make up the top five U.S. commodities purchased by Mexico, according to USDA Foreign Agricultural Service data.

    At $13.9 billion, grain, feed, oilseeds and related products comprise the largest category of U.S. ag exports to Mexico. Strong recent growth is largely attributable to rising feed demand for the country’s expanding animal protein industry and severe drought, which is limiting domestic crop yields and grazing conditions. Given the ongoing trade tensions between the U.S. and China, Mexico will almost certainly overtake China as the largest export market for U.S. grain, feed and oilseeds in 2025.

    U.S. dairy exports to Mexico continue to follow a pattern of rapid growth. Total U.S. dairy export value to Mexico has risen by 76% since 2020, driven mostly by Mexico’s steadily increasing appetite for cheese. Mexico is the largest export destination for U.S. dairy products and almost twice the size of the second largest, China. And while Mexico’s domestic meat and poultry production continues to climb, consumption is expanding so quickly that imports from the U.S. are increasing as well.

    Mexico is also a sizeable importer of a wide array of U.S. packaged food and related processed agricultural products. Consumer-packaged goods, bakery and confectionery items represent most of those products. Other categories include fresh and processed fruit and vegetables, sweeteners and tree nuts.

    Over the past decade, cross border trade of food and agricultural products between the U.S. and Mexico has doubled to reach $80 billion. While free trade agreements have fallen out of favor in recent years, Fox said it’s hard to see the interconnectedness in food systems between U.S. and Mexico as anything but a “win-win” for both countries. “Consumers on both sides of the border benefit from a wider array of food choices at lower prices than they would otherwise.”

    Read the research brief, Mexico Poised to Claim Top Export Spot for U.S. Ag Products.

    About CoBank

    CoBank is a cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving more than 78,000 farmers, ranchers and other rural borrowers in 23 states around the country.

  • Tariffs Compound Economic Anxiety Among US Consumers and Businesses Amid Fears of Economic Slowdown

    Consumer and business sentiment regarding the U.S. economic outlook continues to deteriorate after dropping sharply over the past few months. Rapidly worsening expectations about everything – from inflation and personal income to business and labor market conditions – are elevating concerns among business owners, investors and consumers alike.

    So far, the hard data on key economic indicators like unemployment, job creation, weekly payrolls and consumer expenditures suggest the U.S. economy remains fairly strong. Even the recent stock market pullback is a symptom of flagging confidence about the future rather than a reflection of current business performance. The question on the minds of investors, businesses and corporate boards is whether the declining expectations will soon translate into slower spending and tightening profit margins.

    According to a new quarterly report from CoBank’s Knowledge Exchange, the answer to that question will likely come into view by the end of June, if not sooner. Historic data suggests that declines in consumer spending begin to become apparent three to five months after a sharp decline in economic sentiment. Consumer spending accounts for about 70% of all U.S. economic activity.

    “Not including the brief pandemic-related recession, which was overwhelmed by massive government stimulus, the previous three U.S. recessions in 1990, 2000 and 2007 were all forewarned by weakening sentiment that led to a steep decline in consumer spending,” said Rob Fox, director of CoBank’s Knowledge Exchange. “The next set of hard data from reports on retail sales and consumer spending should begin to provide some guidance as to which way the economy is heading.”

    Despite a 90-day partial reprieve, the new tariff regime remains likely to increase inflation and cut economic growth, Fox added. “While the severity of the near-term effects is up for debate, the longer-term impact of capricious U.S. trade policy is the likely loss of trust abroad in U.S. policymaking, something that will be very hard to regain.”

    Until recently, most observers viewed the administration’s tariff campaign as a short-term negotiating tactic. It now appears a primary objective is to bring more manufacturing capabilities back within U.S. borders, which will take time. But unpredictable tariff policy could stand in the way of achieving that goal, as businesses are unlikely to invest millions or billions of dollars based on expectations of a policy that’s subject to change at any moment.

    U.S. Government Affairs
    With the whole country watching the impact of President Trump’s sweeping tariffs, Congress has yet to act on this economic gambit. Currently equity and commodity markets are weakening, and the patience of the American people is being tested. Many individuals and businesses are hoping to see the tax law extended, several industries need meaningful immigration reform, and agriculture still demands a Farm Bill. The American public will ultimately demand a functioning Congress.

    Grains, Farm Supply & Biofuels
    Uncertainty over trade and biofuel policy pulled corn, soybean and wheat prices down last quarter, despite the tailwind of a weakening U.S. dollar. Trade concerns weighed most heavily on wheat prices as world buyers have multiple exporters at their disposal. U.S. grain stocks on March 1 revealed a strong usage pace for corn and soybeans, but wheat usage continued to fall. Farmers intend to plant the largest corn acreage in the U.S. since 2013 as corn offers the greatest margin opportunity.

    Crop production expenses are expected to continue trending downward, but they remain elevated in relation to lower commodity prices. While fertilizer prices have fallen, last year’s wet fall will require heavier spring applications and rising corn acreage signals more demand for nitrogen. Ag retailers and farm supply cooperatives head into the spring agronomy season facing labor challenges and obstacles sourcing crop chemicals from China. Growth in biologicals remains a bright spot for cooperatives.

    Renewable diesel and biodiesel production has scaled back to find stability in the absence of the blender’s tax credit, pushing prices above petroleum. Domestic production was down 41% year-over-year for January and February as margin pressure exceeded projections. Establishment of the renewable volume obligations under the Renewable Fuel Standard and decisions on the Clean Fuel Production Credit will largely determine the trajectory of biofuels demand and production.

    Animal Protein & Dairy
    Record high prices across the beef cattle sector remain amid continuing herd liquidation and delayed rebuilding. Despite volatility in the U.S. cattle herd, the beef sector has been able to maintain production to meet strong consumer demand. Through the third week of March, U.S. beef production was up slightly compared to 2024. Weekly dressed cattle weights have pushed 3% to 6% higher than a year ago, hitting a record 882 lbs. per head in late January. Packer margins remain squeezed as feeder cattle prices are continuing their upward trajectory.

    The U.S. pork sector is positioned for moderate growth this year, which should support hog prices and keep pork an affordable protein alternative to beef. Growing export opportunities and strengthening domestic interest in pork are moving U.S. hog prices higher. Lean hog and cutout prices were up to start 2025 and early signs of an upward turn in the production cycle are emerging. Pork producer margins have been positive for 11 consecutive months through February 2025.

    Strong broiler prices and low inventory levels are fueling optimism in the poultry sector. Production metrics have yielded a moderately favorable outlook for 2025. Chick placements are up 2.5% year-to-date. Breast meat prices have been on the rise. But with beef prices chasing record highs, food service outlets have ample incentive to center feature activity on white meat chicken. That bodes well for broiler integrators and consumers as the chicken segment tends to attract shoppers seeking value.

    The potential for prolonged trade disputes with Mexico, Canada and China threatens the outlook for U.S. dairy demand. Combined, the three countries account for one-half of all U.S. dairy exports. Market uncertainty has sent futures contracts tumbling. From early January to early April, April-to-June Class III milk futures fell by $2.57 per cwt. Class IV dropped even further, losing $2.73 over 100 days. Despite the headwinds, dairy continues to have some bright spots, most notably lower feed costs.

    Cotton, Rice & Sugar
    U.S. cotton farmers are struggling with the lowest cotton prices in five years. Slowing consumer demand, ample world supplies and trade policy concerns have driven prices lower. Total U.S. cotton export commitments at the end of the first quarter were down 4.6% year-over-year. Purchases from China – the world’s top cotton buyer – were down 82.6%. China harvested its biggest cotton crop in 11 years. Brazil, the world’s top cotton exporter, is also set to harvest a record crop.

    The flood of Indian rice onto the world market following the country’s lift on export restrictions has pulled U.S. long-grain prices to four-year lows. U.S. rough rice stocks on March 1 were down 3.6% year-over-year due to strong export demand from Mexico. But the durability of last quarter’s swift export pace is under scrutiny. Uncertainty over trade policy is showing signs of curbing demand for U.S. rice abroad.

    Despite tightness in world sugar supplies, the large U.S. sugarbeet harvest last fall has capped price rallies. Sugar imports from Mexico are expected to be the lowest since 2007/2008 as Mexico struggles with drought and lower cane sugar production. U.S. sugarbeet farmers are expected to expand planted acreage this spring with USDA forecasting acreage to climb to 1.132 million, the highest in three years.

    Food & Beverage
    Food and beverage manufacturers are revising their sales and earnings expectations downward as consumer sentiment has soured. Prices remain a top concern for consumers, who continue to pull back on grocery spending. More than 80% of U.S. consumers anticipate tariffs will raise prices, with groceries expected to see the highest increases. Recognizing that more price increases could lead to volume attrition, food and beverage manufacturers are aiming to improve efficiencies and demonstrate value. Growth in private label grocery sales, which reached record levels in 2024, is expected to continue.

    Power & Digital Infrastructure
    Surging power demand and a faster replacement cycle for aging infrastructure is causing electricity prices to outpace inflation for consumers. Even greater cost escalation could lie ahead, as critical elements of the electricity supply chain face new import tariffs and accelerating trade headwinds. Spending on delivering electricity has been increasing at the fastest clip in decades, with a growth rate of 50% over the past five years. The U.S. power grid needs substantial investment, but with much of the supply chain imported, the price tag is rising.

    The Trump administration is expected to loosen requirements for the $42.5 billion Broadband Equity, Access and Deployment program. Changes will likely include a more technology-agnostic approach to how the money is allocated, which will benefit wireless technologies. Under the previous administration, the BEAD program took a fiber-first approach to “future proof” networks built in rural America. Reduced emphasis on fiber means fixed wireless access and low earth orbiting satellites could play a larger role in rural America’s broadband access and accelerate connectivity.

    Read The Quarterly. Each CoBank Quarterly provides updates and an outlook for the Macro Economy and U.S. Agricultural Markets; Grains, Biofuels and Farm Supply; Animal Protein; Dairy; Cotton and Rice; Specialty Crops; Food & Beverage industries and Rural Infrastructure.

    About CoBank

    CoBank is a cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving more than 78,000 farmers, ranchers and other rural borrowers in 23 states around the country.

    CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture, rural infrastructure and rural communities. Headquartered outside Denver, Colorado, CoBank serves customers from regional banking centers across the U.S. and also maintains an international representative office in Singapore.

  • U.S. Dairy Replacement Heifer Numbers Fall to a 20-Year Low

    The increasing cost of raising heifer calves has prompted a steep decline in dairy replacements. California Dairy Editor Matthew Malcolm recently met with Corey Geiger, Lead Dairy Economist from CoBank, to discuss the impact of these trends and opportunities for dairy producers.  Watch this brief interview, and read more in California Dairy Magazine.

    Please thank this video’s sponsor afimilk for their industry support.

  • Record Demand for Butterfat in Dairy Expected to Continue

    At the World Ag Expo, California Dairy Editor Matthew Malcolm met with Corey Geiger, Lead Dairy Economist from CoBank, to get the inside scoop on record growth trends in demand for butterfat in dairy and what this means for California dairy producers.  Watch this brief interview, and read more in California Dairy Magazine.

    Please thank this video’s sponsor afimilk for their industry support.