California Ag Network

Tag: CoBank

  • Dairy heifer inventories to remain low before rebounding in 2027

    The U.S. dairy herd has reached its largest size in 30 years, but one critical subset of the herd — replacement heifers that represent the next generation of milk cows — remains historically low. The number of heifers available to enter the milking herd has fallen sharply, dropping to the lowest level since 1978. The decline comes as strong financial incentives are prompting dairy farmers to produce calves destined for the beef supply rather than milk production.

    According to a new report from CoBank’s Knowledge Exchange, replacement heifer supplies are projected to shrink even further in 2026 before beginning to rebound in 2027. With replacements in short supply, producers are retaining adult dairy cows that would have typically been culled, contributing to the overall increase in the U.S. dairy herd. At the same time, producers are making more beef-on-dairy calves, further tightening dairy replacement heifer supplies. This has pushed heifer prices into record territory, well over $3,000 per head.

    “On most dairy farms, net margins are currently being driven by the beef check, not the milk check,” said Corey Geiger, lead dairy economist with CoBank. “Five years ago, calf and cull cow sales accounted for 5% of a dairy farm’s bottom line while milk sales represented 95% of their revenue. Today, beef sales account for 12% to 15% of revenue on many farms, with some operations approaching 20% when measured on a per hundredweight basis. That shift is reshaping the U.S. dairy herd, most notably through the decline in replacement heifers.”

    CoBank’s modeling indicates that dairy replacements entering the milking herd between last year and this year are shrinking by a combined 796,000 head, followed by a rebound of 360,200 head in 2027 and 2028. The projections are based on semen sales data from the National Association of Animal Breeders and assume average annual rates of conception, pregnancy loss and other key reproductive measures.

    Strong consumer demand for high‑quality protein has placed dairy farmers in a unique position to capture growing revenue streams from both beef and milk sales. However, the timing of those revenue streams differs significantly. Raising dairy replacements requires a two‑year investment, while selling beef‑on‑dairy cross calves provides immediate income.

    The economic incentive for dairy farmers to produce more calves destined for the beef supply is rooted in the historic contraction in the U.S. beef cattle herd, which currently stands at a 75-year low. Tight beef supplies and strong demand have driven beef cattle prices to record highs, prompting dairy farmers to dramatically increase their use of beef semen. In 2025, 82.7% of all U.S. beef semen units were purchased by dairy operations.

    Dairy farmers are increasingly using gender‑sorted semen, genomics and beef‑on‑dairy strategies to optimize breeding for both production and profitability. Semen purchases have consolidated into two primary categories: gender‑sorted dairy semen for producing replacement heifers and beef semen for producing beef‑on‑dairy calves. From 2020 to 2025, beef‑on‑dairy semen sales rose 62%, and gender‑sorted semen sales increased 53.6%. Meanwhile, conventional dairy semen sales fell 47.4%.

    Abbi Prins, agricultural commodities economist with CoBank, said the surge in beef semen sales to dairy farmers in 2023 will continue to suppress replacement heifer inventories this year due to the three-year biological cycle from conception to first calving.

    “Our modeling shows 438,800 fewer replacement heifers entering dairy herds this year. That trend will begin to reverse in 2027 with 285,400 dairy replacements projected to enter the milking herd. Over time, we expect dairy farmers will continue rebalancing their breeding programs to optimize production for both beef and dairy markets. But dairy will continue to play a significant role in the beef supply for the foreseeable future, as rebuilding the beef cattle herd will take several years.”

    Read the report, Dairy replacements should begin a slow rebuild in 2027 and 2028. — Story contributed by CoBank

  • 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.

  • Golden State Farm Credit Gives Back During Hunger Action Month

    Golden State Farm Credit (GSFC) is joining the fight against hunger this September in recognition of Hunger Action Month, by partnering with local food banks in the communities it serves.

    In partnership with CoBank’s matching efforts, GSFC has provided $5,000 each to North State Food Bank and Central California Food Bank, to help expand food access in rural communities throughout Northern and Central California. Furthermore, GSFC has also contributed an additional $10,000 to Central California Food Bank in support of its 12th Annual Feeding Families Fund Drive, hosted in partnership with GAR Bennett, where every dollar donated will receive a 50% match from GAR Bennett.

    Community members can also join the initiative by donating online throughout September or by visiting The Market in Fresno, on Friday, September 19, 2025. GSFC representatives will be on-site in the afternoon to present a check, which will help Central California Food Bank feed over 300,000 people each month throughout Fresno, Madera, Tulare, Kings, and Kern counties.

    “GSFC remains deeply committed to supporting the rural communities that we serve, and no time is more important than Hunger Action Month,” said Rob Faris, president and CEO of Golden State Farm Credit. “47 million people in America face hunger every day, and we are proud to play even a small role in supporting solutions that further the mission of these local food banks.”

    In addition to financial contributions, GSFC employees made a direct impact in helping provide food access locally by volunteering their time earlier this month. As part of GSFC’s greater Hunger Action Month efforts, a team of staff members volunteered at a food distribution site in Chico, providing food boxes for 300 families throughout the community.

    About GSFC:

    Golden State Farm Credit (GSFC) is a lending institution of the Farm Credit System with offices in Northern and Central California that service the counties of Butte, Glenn, Tehama, Shasta, Trinity, Fresno, Kings and Tulare. The GSFC administrative office is located at 3013 Ceres Avenue, Chico, CA 95973. The Farm Credit System (System) is a nationwide network of borrower-owned lending institutions that provides loans, leases, and related services to farmers, ranchers, rural homeowners, agribusiness, agricultural and rural utility cooperatives, and Young, Beginning and Small Farmers nationwide. Congress established the System in 1916 to provide a reliable source of credit for the nation’s farmers and ranchers. Today, the System provides more than one-third of the credit needed by those who live and work in rural America. For more information about Golden State Farm Credit, call (530) 895-8698 or visit us online at www.goldenstatefarmcredit.com.

  • Innovative Ag Education Program Reaches Over 1 Million California Students

    Educating today’s students about the importance of California agriculture is critically important to protecting the future of farming and ranching in the Golden State. For nearly 40 years, the California Foundation for Agriculture in the Classroom has been a leader in that effort and is continuing to innovate to meet the needs of California classrooms.

    “We’ve been around since 1986, and our whole mission is to support teachers and students in incorporating agriculture into their classroom because agriculture affects our daily lives. It’s the food we eat; it’s the clothes we wear – it affects everything that we do,” said Amanda Fletcher, the Foundation’s executive director.

    During 2024, Fletcher said the Foundation’s programs reached over 1 million pre-K to high school students by engaging more than 34,000 teachers across California. Among the Foundation’s most-used resources was the 22ndannual issue of What’s Growin’ On, a 16-page interactive student newspaper funded in part by Farm Credit. More than 100,000 copies were distributed.

    Kevin Ralph, California President for AgWest Farm Credit, said California’s Farm Credit organizations have supported the Foundation’s work for many years.

    “Farm Credit has been proud to support What’s Growin’ On for more than 15 years – and in fact increased our support this year – because it’s proven to be an innovative and effective way of educating third through eighth graders about all the aspects of California agriculture,” Ralph said.

    Jacob DeBoer, Regional Marketing Manager with American AgCredit, agreed that the Foundation continues to do great work.

    “What makes the Foundation’s efforts so successful is that it comes up with ways to really reach students,” DeBoer said. “This year, the theme is ‘Imagine Your Future in Agriculture,’ which is especially important given the need to attract students to consider careers in ag-related fields. Besides information about farming, the newspaper and other programs discuss careers in fields including tech, marketing, soil science and ag mechanics. There’s nothing like drones to capture a young student’s imagination.”

    All seven Farm Credit organizations serving California – AgWest Farm Credit, American AgCredit, CoBank, Colusa-Glenn Farm Credit, Fresno Madera Farm Credit, Golden State Farm Credit and Yosemite Farm Credit – are financially supporting the Foundation’s work. They are all part of the nationwide Farm Credit System – the largest provider of credit to U.S. agriculture.

    Fletcher said the Foundation got its start in 1981 as a program launched by the California Farm Bureau Federation. It was spun off five years later as an affiliated 501c3 nonprofit. Today, seven – soon to be eight – employees develop age-appropriate curricula using a wide range of distribution methods.

    For example, a popular part of the program is the virtual California Farm Day. This year, 31,000 students watched one of two age-appropriate, hour-long programs including video and live Q&A sessions with ag experts. One segment showed a pest advisor walking through a broccoli field examining plants for insects. He explained that some insects were beneficial, and others weren’t and talked about the steps he took to become a pest advisor.

    “We had over 800 questions asked of the live hosts. A lot of the kids who were on that broadcast were from urban and more disadvantaged schools who don’t always have the ability to go on field trips, so this offered a little window into agriculture and how it affects their lives,” she said.

    “We probably work with 60% urban classes and 40% from the agricultural areas. Our target demographic is those urban and disadvantaged schools because we want to get into schools in L.A. and the Bay Area to make sure they’re getting the same education about agriculture that students in counties that have that rich agriculture history have access to.”

    This year, a grant from the California Department of Food and Agriculture allowed the Foundation to develop an interactive website called KnowinWhatsGrowin.com. Fletcher said it matches the state’s fourth-grade curriculum and focuses on specialty crops grown in different parts of the state.

    Santa Clara County students can learn about mushrooms, for example – how they’re grown and harvested, nutritional information, products that use mushrooms and even recipes.

    Because the Foundation strives “to keep growing, because if you stay stagnant that doesn’t work when the goal is to get the information out to the populace,” the staff is currently beginning a four-year project to develop a monthly curriculum for high school students that outlines ag-related careers. The lesson plans will tie into math, science and ag mechanics.

    “Then we are going to be working on developing an internship program that will go along with that. It’ll be exciting in the next couple of years once that gets off the ground,” she said.

    “We want to create materials that are easy and quick for teachers to implement so they have good programming for their students and to make sure that the next generation is informed about where their food and fiber comes from.”

    About Farm Credit:

    AgWest Farm Credit, American AgCredit, Colusa-Glenn Farm Credit, CoBank, Fresno Madera Farm Credit, Golden State Farm Credit and Yosemite Farm Credit are cooperatively owned lending institutions providing agriculture and rural communities with a dependable source of credit. For more than 100 years, the Farm Credit System has specialized in financing farmers, ranchers, farmer-owned cooperatives, rural utilities and agribusinesses. Farm Credit offers a broad range of loan products and financial services, including long-term real estate loans, operating lines of credit, equipment and facility loans, cash management and appraisal and leasing services…everything a “growing” business needs. For more information, visit www.farmcreditalliance.com

    About the California Foundation for Agriculture in the Classroom:

    California Foundation for Agriculture in the Classroom (AITC) is a 501(c)(3) nonprofit dedicated to increasing agricultural awareness and understanding among California’s educators and students. AITC develops accurate, teacher-tested educational materials, provides training and programs for educators, and collaborates with organizations to highlight the importance of agriculture in daily life. Through initiatives such as comprehensive lesson plans, the What’s Growin’ On? student newspaper, the Imagine this… writing contest, Virtual Farm Day, the annual teacher conference, and many more programs, AITC fosters agricultural literacy and supports the future of agriculture – impacting over 1 million students annually. For more information, visit www.learnaboutag.org.

  • Shrinking Labor Force Threatens US Economic Growth

    Declining labor force participation, lower birth rates and a collapse in net migration are combining to squeeze the U.S. labor supply. The looming labor shortage could begin to weigh on businesses and strain economic growth as soon as later this year, according to a new quarterly report from CoBank’s Knowledge Exchange. With the labor supply about to get tighter, businesses and industries operating in rural America should be increasing their focus on technology to overcome labor availability challenges.

    “Barring an unforeseen change in labor force participation rates or immigration policies, the pool of available workers is set to shrink precipitously in the next few years,” said Rob Fox, director of CoBank’s Knowledge Exchange. “The problem will be even more acute in states with lower population growth in the Upper Midwest, Corn Belt and the Central Plains. Increased adoption of technology, namely AI and robotics, will likely be at the core of any strategy to address the oncoming labor squeeze.”

    The labor force participation rate has trended downward since 2000, and the trend may be accelerating. Nearly 2.5 million working-aged people dropped out of the labor force in the past eight months alone. The U.S. fertility rate has plummeted since the Great Financial Crisis in 2008, reducing the number of native-born citizens entering the workforce. The loss of those new workers coincides with baby boom generation retirements, amplifying the impact on the overall labor supply. Those two factors, combined with more restrictive immigration policies and aggressive deportation efforts, will put significant stress on the U.S. labor supply with the potential to impede economic growth.

    U.S. Economy

    While the economy appears to be running well as evidenced by low unemployment and easing inflation concerns, consumer sentiment remains historically low. A major reason for the sour mood among consumers is the escalating cost of housing. The monthly cost of homeownership in the U.S. rose 60% between 2021 and 2024 and there is little hope of improvement anytime soon. Rising unaffordability of homes has driven the homeownership rate lower for the first time since the aftermath of the 2008 subprime mortgage crisis. For homebuilders, the economic situation and outlook are equally painful. New single-family housing starts have dropped by 16% over the last three months and the index of publicly traded homebuilders is down about 30% since late 2024.

    U.S. Government Affairs

    President Trump scored a major legislative victory with the passage of the One Big Beautiful Bill Act. As with all budget reconciliation efforts, politics took center stage – and this one may have caused the deepest political rift in a decade. Fights over the farm program policy and funding addressed in the OBBBA left the traditional farm bill coalition in Congress fractured, and longstanding industry alliances in doubt. Farmers and ranchers still walked away with significant wins. But rural economic development programs were cut or left out entirely, and domestic food assistance received its largest funding cut in history. In all, total farm bill program funding took a nearly $200 billion hit.

    Grains, Farm Supply & Biofuels

    Favorable growing conditions in the U.S. and South America are pressuring corn prices, which fell 7% last quarter on the prospects for a record U.S. harvest this fall. Export demand for old-crop U.S. corn and soybeans remains strong, but new-crop export sales are sluggish amid ongoing trade uncertainty. Sales of new-crop soybeans are historically low due to the lack of Chinese demand. The U.S. winter wheat harvest on the Plains has been hampered by heavy rains, but crop yields are set to be the best in years. U.S. wheat stocks available for blending were up 22.1% year-over-year as of June 1.

    Agriculture retailers and farm supply cooperatives enjoyed strong spring agronomy sales due to good weather conditions and increased corn acres. However, pre-sales for the 2026 growing season are projected to soften due to tariff uncertainty, higher interest rates and farmer profitability constraints. As farmers look to minimize losses, many may choose to limit chemical applications. Agriculture retailers are delaying buying decisions and inventory builds due to higher input prices. USDA’s latest cost of production estimates show no relief in sight and a slight increase from 2025 into 2026.

    Lingering uncertainty surrounding U.S. biofuels policy continues to cast a shadow on the outlook for production and demand. Renewable volume obligations, small refinery exemptions and the 45Z Clean Fuel Production Tax Credit are the three legs the biofuels industry will be balancing on as the year progresses. Soybean oil may be the winner in EPA’s proposed RVO change, as it likely shifts more domestic soybean oil to be used for biofuels. EPA indicated it would make its determination of small refinery exemptions by release of the final RVO rule at the end of October which will also impact overall biofuels demand.

    Animal Protein & Dairy

    Record high beef cattle prices continue to support strong margins for cow-calf producers and feedlot operators, while squeezing packers. Calf prices hit a record $405 per cwt. in May, up 25% year-over-year. Tight supplies have pushed feeder and fed cattle futures up at a similar pace. Feeder cattle futures for the nearby August contract were trading at $302 per cwt., up 18% from a year ago. The supply of Prime and Choice graded beef is at its highest level since 1988, as U.S. beef producers have focused on improving meat quality to effectively boost demand.

    Domestic and international demand for pork is gaining momentum with the start of grilling season and lower cold storage inventories. Hog prices have jumped significantly through June. Lean hog futures on the CME surpassed $112 per cwt. in June, the highest since July 2022. The pork carcass cutout value rose to average $103 per cwt. in the second quarter. Inventories of pork in cold storage were down 7% year-over-year, signaling strong international demand for U.S. pork. Domestically, new marketing campaigns are promoting pork’s taste and flavor, encouraging an upward move in prices for producers.

    The U.S. broiler sector entered 2025 well positioned to serve the restaurant industry’s desire to show consumers an inflation-busting animal protein offering. Promotional activity and new chicken menu items throughout the quick service restaurant sector are meeting consumer demand for a value-added meal. Production of eggs and broiler meat are improving and setting new records to help meet the growing demand. Broiler prices have seen an extraordinary boost from value-added product interest. Seasonal market pressure is likely as the year progresses, but demand should remain relatively stable.

    The U.S. dairy herd is continuing to grow with 90,000 cows added since January. Most of that growth has occurred in Texas, Idaho, Kansas and South Dakota, all states with new dairy processing assets coming online. Producer margins have been favorable enough for dairy farmers to retain cows for milk production rather than sending them to slaughter to capture record beef prices. U.S. milk production increased by 1.6% year-over-year in May, the highest monthly growth in over two years. Strong production has pushed butter exports to reach 87% of last year’s total through May.

    Cotton, Rice & Sugar

    Expectations for the second smallest U.S. cotton crop in 10 years have lifted cotton prices, but not enough to cover farmers’ cost of production. Following two years of drought and disappointing yields, U.S. cotton farmers on the Plains are expected to enjoy bigger yields this year but on a much smaller planted acreage. U.S. Department of Agriculture expects planted acreage for the 2025/26 crop to fall 9.5% to 10.1 million acres. Persistent pressure from a record Brazilian cotton harvest and uncertainty over trade policy with China, continue to limit prices from climbing to profitable levels for U.S. farmers.

    Inclement weather during planting season in southern parts of the U.S. curbed long-grain rice acres while medium-grain acreage in California rebounded as rejuvenated reservoirs allowed farmers to irrigate more acreage. The shortfall in long-grain rice will impair the U.S. exports program and domestic millers will compete for scarcer bushels. Global rice prices continue to struggle under the weight of a flood of rice released from record Indian stockpiles. Strong U.S. exports of medium-grain rice, particularly to Japan, are a bright spot for U.S. rice farmers.

    Sugar demand faces a multitude of headwinds, including widespread usage of GLP-1 dietary medications reducing consumer demand for snack foods. World and U.S. sugar prices fell last quarter as a result of softening demand. Sugar manufacturers note consumer packaged goods companies have reduced forward bookings, resulting in higher-than-normal inventories. Globally, lower fuel and ethanol prices have caused raw sugar mills to send sugar to the export market rather than to ethanol producers, increasing global sugar supplies.

    Food & Beverage

    Food and beverage brands are reporting less-than-stellar earnings in the most recent quarter, with companies from PepsiCo to Kraft Heinz lowering their fiscal year guidance. Others are taking a wait-and-see approach to the impact of tariffs and higher prices on their overall performance. KPMG’s April 2025 consumer survey found 69% of consumers are eating more at home, with 85% of those citing budget constraints. Restaurants are feeling the shift in consumer spending. Virtually all major chains in the country have experienced notable declines in recent quarters. Restaurants laser-focused on delivering value have had the best success in recent months.

    Power & Digital Infrastructure

    Given geopolitical unrest following the U.S. strikes on Iranian nuclear facilities, U.S. energy security and the strategic petroleum reserve have received surprisingly little attention. The U.S. is now a net oil exporter, leading some to question whether the U.S. should have a strategic reserve at all. However, calls for the dismantling of the SPR are likely misplaced. While the shale revolution offers an important buffer, the nation’s petroleum reserve remains a critical national security asset, providing additional speed and agility when oil supply is scarce. Keeping the SPR at historic low levels limits response options to future events and risks greater consumer price exposure.

    Recent changes to the Broadband Equity, Access and Deployment program mark a shift away from the Biden administration’s “fiber-first” strategy. Under the new rules, fixed wireless and satellite technologies will now have greater access to BEAD funding provided they meet minimum performance benchmarks. This new direction introduces both strategic opportunities and competitive threats for rural broadband providers. Operators that choose not to participate in BEAD may find themselves vulnerable to government-funded fixed wireless competitors. Alternatively, rural internet service providers can go on the offense and pursue BEAD funding to expand their own footprints, especially in areas where fixed wireless is eligible.

    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.

  • AI can Empower Agriculture Retailers, Farm Supply Cooperatives

    New artificial intelligence technology is enabling agricultural retailers and farm supply cooperatives to optimize their operational performance while strengthening all-important customer relationships. In addition to broad-based AI platforms that can be leveraged to simplify everyday business operations, farm suppliers now have access to AI apps specifically designed to support field agronomy and crop production.

    According to a new research brief from CoBank’s Knowledge Exchange, AI technology offers ag retailers a new set of tools to optimize workflows, inventory management, employee performance and other key business functions. Farm supply businesses that rise to the challenge of adopting AI can also enhance their position as trusted advisors and essential partners in the ag supply chain.

    “AI in agriculture can be utilized in a company’s back office, front office as well as within agronomy and supply chain operations divisions,” said Jacqui Fatka, farm supply and biofuels economist with CoBank. “Early adoption and reliable partnerships will provide an advantage for those willing to test the AI landscape. Ag retailers should research companies and pick AI partners who understand agriculture and promise value beyond just lofty ROIs.”

    Agricultural cooperatives and retailers serve as a critical relationship bridge between farmers and input providers. The potential erosion of those relationships due to alternative distribution models, disruptive technologies or other competing forces is one of the biggest challenges ag retailers face moving forward. Early adoption of AI can help the ag retailer sector stay ahead of competitors while maintaining and strengthening customer relationships.

    Fatka suggested ag retailers start with easy-to-implement, low-stakes AI applications for things like email and presentation assistance and customer interaction summaries before tackling more complex tasks. “Testing out different pathways to gain internal acceptance can lead to greater long-term success. For instance, an easy initial test might be recording virtual meetings with CoPilot. Within minutes, it can deliver an AI-generated summary of the meeting with key takeaways, immediate action items and future tasks.”

    Ag retailers can also start leveraging AI to optimize workflows for standard business functions like human resources, accounting, operations and sales. Using AI to evaluate and streamline these functions offers a high return on investment relative to the efforts required to build or implement such tools. Fatka stresses, however, that companies should establish guardrails for the use of customer information and understand privacy changes with the use of AI tools.

    While AI is unlikely to eliminate ag retail jobs, it can help simplify tasks and reduce human error or bias. In addition, as labor continues to be a challenge for many rural enterprises, it can provide continuity during labor turnover. AI can also help agronomists and other staff cover more acres or customers. Apps like AgPilot enable agronomists to interact with AI verbally while traveling between customers, allowing them to input crop protection recommendations and smoothly advance potential sales from one stage to another.

    “The stakes are high for agribusinesses operating in an environment where margins are tight,” said Fatka. “However, ag retailers will need to ensure AI costs do not outweigh the benefits. The cost of experimentation is minimal and delaying a trial adoption of these promising tools could result in missed opportunities for growth.”

    Read the research brief, How AI is Empowering Agriculture Retailers.

    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.

  • New Pork Campaign and Market Conditions Poised to Revive Domestic Demand

    The U.S. pork industry is charting a new course to engage with American consumers and boost domestic demand as trade policy and global market dynamics threaten the pace of export sales. Pork producers have relied heavily on global demand in recent years. Nearly one-quarter of all U.S. pork was sold to international buyers in 2024. Continued success in the export market hangs in the balance as China trims imports of U.S. goods and trade conflicts curb global sales among other key buyers.

    While global pork consumption has edged upward, U.S. per capita consumption has been flat for more than 50 years at 50 lbs. on average, according to the USDA. That trails annual beef and chicken consumption, which exceeds 60 lbs. and 100 lbs., respectively. The pork industry is aiming to gain ground with a new consumer marketing program, “Taste What Pork Can Do.” Focusing on flavor and featuring a wide variety of recipes and convenient cooking techniques, the campaign encourages U.S. consumers to reimagine the possibilities of pork for at-home meals.

    According to a new report from CoBank’s Knowledge Exchange, the campaign represents the beginning of what could be a “new pork” on U.S. consumers’ plates. The next opportunity could be reevaluating hog genetics in an effort to match the campaign’s emphasis on flavor. Taste continues to be one of the top drivers influencing consumer meat purchases, as evidenced by sales of the most popular pork product, bacon.

    “If the U.S. consumer is to truly reimagine pork, some fairly significant changes may be required over time,” said Brian Earnest, lead animal protein economist with CoBank. “Recalibrating the genetic hog makeup and showcasing different cuts at retail and through food service could be in order. Utilizing pork in a new way could help find the pork equivalent of a beef T-bone or rib-eye for a richly flavored, premium-priced offering.”

    The industry’s consolidation era twenty years ago sent the U.S. hog sector down a path of value, efficiency and appeasing comparisons to “other categories” of meat. The lean hog formulation adopted by the broad bulk of U.S. producers has largely influenced the pork U.S. consumers see today. However, consumers’ views regarding fat content have evolved and health concerns about fat have subsided. A refreshed approach to hog genetics that focuses on fat content, flavor and consumer preferences over production efficiencies may be necessary to meaningfully grow domestic demand.

    Bacon has been the most popular pork item in the U.S. for the last 10 years, with strong demand supporting higher pricing. Sausage-type items and pizza toppings like pepperoni have also gained strong consumer demand. Values for pork trim used in sausage making have climbed accordingly. Historically, averaging less than $40 per cwt., pork trim for sausage surged to more than $80 per cwt. for the first time in 2022.

    Unlike chicken breasts and beef burgers, U.S. consumers frequently find it difficult to cook “the perfect pork chop.” While pork loins and hams offer exceptional value, they lack the benefit of convenience compared to smaller pork cuts. New pork product variations that offer both convenience and enhanced flavor may be key to helping consumers reimagine pork.

    Despite the challenges associated with broadening pork’s appeal with domestic consumers, Earnest said the industry is in a strong position. “With supplies ample and wallets tight, pork has never been in a better position to grow its market share with U.S. consumers. Pork is on a new path and it’s an exciting time for the industry.”

    Read the report, Pork’s Opportunity to Reconnect with U.S. Consumers Has Never Been Bigger.

    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.

  • Rural Industries Disproportionately Exposed to Federal Policy, Facing Downside Risks in 2025

    The U.S. continues to benefit from solid economic growth, low unemployment and moderating inflation. From today’s vantage point, the U.S. economy seems likely to continue on that trajectory into 2025. However, the outlook for the rural economy is more volatile and uncertain. Rural industries are disproportionately exposed to federal policy, and 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.

    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.

    “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. Depending on how policy plays out, those two areas could be big challenges in 2025 and beyond.”

    The CoBank 2025 outlook report examines several key factors that will shape agriculture and market sectors that serve rural communities throughout the U.S.

    U.S. Economy: A New Economic Era Begins

    Most economists are forecasting 2025 U.S. GDP growth around 2.5%-3.0%, essentially the same as today. However, those forecasts are based on rather mild assumptions on 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. Government: Trump Administration, Congress Set for Bustling January Start

    Congress is expected to wrap up the lame duck session of the 118th Congress by Dec. 19, hopefully addressing important pieces of unfinished business. A one-year extension of the 2018 Farm Bill is increasingly likely. President-elect 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.

    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. 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. 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.

    Grains, Farm Supply & Biofuels: Policy Uncertainty Weighs on Exports, Biofuels

    A strengthening U.S. dollar, combined with the potential for trade disputes and record-large South American crops, weigh heavily on the outlook for grain and oilseed prices in 2025. U.S. farmers are widely expected to struggle with further margin compression as weaker commodity prices test farmers’ ability to lower production costs. Crop input decisions will be evaluated much more closely with a focus on inputs that provide the greatest return on investment. The bearish outlook for oil prices diminishes the demand picture for ethanol, biodiesel and renewable diesel. Uncertainty over U.S. biofuel policy under the new administration also clouds the demand outlook for biofuels.

    Animal Protein: Rising Margins Improve Prospects for Growth

    Falling feed costs and rising producer margins have renewed expansion interest in animal protein segments. However, labor, construction and land costs remain elevated, tempering expectations for any meaningful supply growth in the near term. U.S. beef cow herd expansion is not expected to start until 2026 or 2027. The smaller herd will further support higher feeder and fed cattle prices in the coming year. With consumers now pushing back on beef prices already near historic highs, packer margins will remain under pressure well into 2025.

    Dairy: Record Investment Will Continue to Grow the Category

    The U.S. will see an unprecedented $8 billion in new dairy processing investment through 2026. Some of the new plants are poised to come online in 2025, with about half of the investment in the cheese category. The expected surge in cheese and whey output will likely put downward pressure on dairy product prices in the second half of the year. Sourcing additional milk supplies to fill new plant capacity is a looming question. 2023 and 2024 will go down as the first back-to-back years since the late 1960s that U.S. milk production took a downturn. On the flip side, higher component levels in farmgate milk, largely butterfat and protein, have lifted finished product yields.

    Food & 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.

    Power & Energy: What an IRA Rollback Might Look Like

    President-elect Trump’s return to the White House will signal a significant shift in U.S. energy policy. While he has promised to end the Inflation Reduction Act, slowing the clean energy momentum that has accelerated under the IRA may be more difficult than imagined. Popular programs in the IRA have directed significant investments to many rural and economically distressed communities. And more than a dozen House Republicans have voiced concern that repealing the IRA could jeopardize ongoing development in their communities. Clawing back IRA funds that have already been allocated could prove to be very difficult. The more likely scenario is that unallocated IRA funding will be redirected to other priorities.

    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.

    Read the full report, The Year Ahead: Forces That Will Shape the U.S. Rural Economy in 2025.

    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 77,000 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.