Agricultural Outlook 2025: Key Indicators and Proactive Strategies - By Dr. David Kohl

By Dr. David Kohl

As the dog days of summer fade and autumn approaches, the agricultural economy presents a tale of two sectors. Row crops and grain commodities continue struggling to find winning strategies or minimize their losses, while diversified operations and livestock enterprises, particularly beef, are enjoying an extended wave of financial prosperity.

The first nine months of 2025 have brought uncertainty across all agricultural enterprises. Intermittent tariffs and sanctions have created mixed signals and considerable volatility in market data, leaving producers navigating through economic noise regardless of their sector's performance.

Against this backdrop, critical questions emerge for agricultural stakeholders:
●    What should be on the economic watchlist for 2025 and beyond—in agriculture, the general economy, and globally?

●    What are the long-term implications for agriculture's future?

●    What proactive measures can producers take, regardless of which end of the economic spectrum they currently occupy?

Key Economic Indicators to Watch

Unemployment: Beyond the Headlines

Economists have long recognized unemployment rates and job numbers as key indicators of economic direction. Keep a close eye on these figures, but understand they can send mixed signals. While unemployment appears low by historical standards, a deeper look reveals something different.

Recent college graduates face unemployment rates nearly 1.5 times higher than the national average, with high school graduates faring even worse. Many job seekers report being ghosted or ignored by companies after multiple interviews, particularly in white-collar and tech sectors. Over the past year, companies have prioritized efficiency by cutting workforce and eliminating entry-level positions. Artificial intelligence (AI) has accelerated this trend, further reducing opportunities for new workers entering the job market.

Stock Market Rise: The Disconnect

On the speaking circuit, people are asking why there is a disconnect between the positive stock market trend and the negative position of the general economy. Sharp stock declines in early spring were followed by record increases in recent months. This can be related to companies increasing their bottom lines by slashing the workforce. The bets on the economic advantages of AI are being built into stock market expectations along with gains from large institutional investors. The anticipation of fewer regulations and more tax cuts add to the euphoria. These increases result in the wealth effect as people who feel richer on paper gains tend to spend more.

Dollar Decline: A Double-Edged Sword

The value of the dollar has seen its largest decline since the Nixon administration. This, in turn, boosts agricultural exports. However, supply exceeds demand globally and has failed to influence the markets. On the negative side, imports such as manufacturing products and technology components are becoming more expensive.

Agricultural producers should closely watch this economic variable, particularly world trade in dollars. Dollar trade has been reduced from 75 percent decades ago to currently 58 percent. De-dollarization of world trade reduces the United States' flexibility as more countries trade outside U.S. currency.

The 800-Pound Gorilla: Federal Debt

What is the 800-pound gorilla impacting interest rates, inflation, and the United States' competitive advantage? The answer is undisciplined fiscal policy and the mounting federal debt, now in the $37 trillion range. Watch the recapitalization of U.S. debt very closely, along with the price of bonds and treasuries.

Foreign investors such as Japan, China, and others have been reducing their holdings of U.S. debt from a little over 50 percent in 2008 down to 30 percent currently. The implications could be higher interest rates and the possibility of financial liquidity issues unsettling the markets. Interest cost on national debt is approximately 20 percent of the budget, and we could see it go much higher if the United States takes on more debt at a higher cost.

The Federal Reserve will have changes in leadership and appointments soon. The Fed can only do so much, and it is usually on the short end of the yield curve. If it moves toward easing monetary policy, this could have implications on inflation and the long-term sustainability of the economy.

What Is Different This Time?

The rise of the Southern Hemisphere along with the BRICS nations (Brazil, Russia, India, China, and South Africa) as a major competitor in commodities over the past decade has short-term and long-term implications for U.S. agriculture. The BRICS are aligning with rising economic powers and account for 40 percent of the world economy. This will impact the agricultural economy first, since it tends to be export-driven. Twenty percent of U.S. net farm income is derived from export.

Proactive Actions for Agricultural Producers

Given these economic headwinds, what are proactive actions for the remainder of 2025 and beyond?

For Row Crop and Small Grain Enterprises

If you are in row crop or small grains enterprises, seeking small wins or minimizing losses will be a high priority. I encourage risk management and marketing to protect against large losses or to position yourself for economic profit windows. The government will not cure the economic ills in the longer term. What must you do to remain sustainable without government payments?

Budgeting, cash flow analysis, and financial monitoring are not just for your banker. Good managers can use these tools to make objective versus emotional decisions. If you utilize your land equity to restructure or refinance debt for financial liquidity, what degree of losses and over what period would move you back to a negative working capital balance? What is your game plan and timeline to break even?

For Profitable Operations

On the flip side, if you are in a more profitable situation, what will be your profit plan? In the beef industry, a solid marketing and risk management plan is not an option but a requirement to protect against downside risk. Many will be required to pay taxes. Do not get caught spending a dollar to save twenty cents. This can reduce your financial liquidity or create financial obligations for an extended period through debt service. 

For All Segments

For all segments, an action plan includes testing various prices, costs, production rates, and interest rate scenarios using cash flow and financial sensitivity analysis. This can be a tool for navigating the economic whitewater regardless of the outcomes it may present.