Last year’s initial net farm income forecast showed the two largest consecutive declines in net farm income history, the picture seems to be improving in 2025.
According to USDA’s Economic Research Service, the first net farm income forecast of the year shows net farm income is expected to reach $180.1 billion, up $41 billion from 2024, while net cash farm income is projected to hit $193.7 billion, a $34.5 billion increase. A staggering 34.5% increase in government payments, from $9.3 billion in 2024 to $42.4 billion in 2025, is the key factor behind the income boost.
Yet, when you look at the specifics, economists continue to be more bullish when it comes to livestock, specifically cattle.
According to economists in the January Ag Economists’ Monthly Monitor survey, shrinking supplies and strong demand are the two major drivers of the historic run in cattle prices. And that’s why out of the 10 major commodities, economists are most bullish on cattle in 2025.
Recession in Row Crops?
Even with the expectation for improved net farm income, with a 34% increase in expected government payments, ag economists are still concerned about the current state of the ag economy for the row crop sector. Sixty-four percent of economists say the row crop side of agriculture is currently in a recession, 36% say it’s not.
“A modest recovery in prices for some major crops has slightly improved the current state of the farm economy, and the outlook has brightened somewhat as well,” said one economist in the anonymous Monthly Monitor survey. “The prospect of economic assistance and disaster payments also improves the farm income outlook in 2025.”
“For row crop profitability, corn and soybean prices have seen some improvement recently offering some decent pricing opportunities, but some farmers may not have any old crop to sell now to take advantage of improved prices,” said another economist. “Without additional price improvement, there is still poor profitability outlook for new crop. But when you look at demand opportunities, there are a lot of unknowns about the future demand for trade and biofuels in the Trump administration. It could be positive or negative and will likely be impactful over the next 12 months.”
Those who argue agriculture is not in a recession, say it’s because:
- $31 billion in direct payments and disaster aid passed by Congress in December.
- The fact strong land values and rents have slowed their increases yet have not seen any significant declines
“We are not in a recession when farmers were still paying off pre-bought 2025 input expenses in 2024 to minimize 2024 tax bills, nor when land values and cash rents are holding as well as they are. There are producers that are over extended and all crop producers are making adjustments, but these are the ebbs and flows that the agricultural industry has managed for decades,” one economist said. “The expectations are changing to expect downside risk, and so people aren’t planning for the downside, and those that do are being penalized.”
Consolidation Concerns
With concerns about a recession, the survey then asked economists if the current environment will accelerate consolidation, and an overwhelming number of economists, 86%, said yes.
Those economists who think it will force consolidation said:
- “Probably mostly in the related industries as they try to consolidate to protect profit margins as producers maybe pull back on input choices or become much more price-conscious.”
- “Farmers will think about exiting earlier, debt/income ratio”
- “It’s only the most cost-efficient survive.”
- “More people are exiting because they have little choice. Much consolidation would be happening even if the market situation were better.”
- “Low margin producers will always be squeezed out by these type of times.”
- “The ability of larger producers to spread costs over a larger number of acres.”
- “Semi-retired farmers tend to call it quits during a down cycle. Farms that rent a substantial portion of their acreage find it increasingly difficult to sustain high cash rents.”
However, other economists argue the downturn hasn’t lasted long enough to force consolidation.
“If the current situation persists for several years, then yes. At this point, it’s too early and not severe enough,” one economist said.
The Main Factors Driving the Ag Economy
When asked to list the main factors driving the health of the ag economy right now, ag economists said:
- Poor grain prices offset by improving livestock margins
- Biofuel policies, tariffs, commodity prices
- The potential for a trade war with China
- South America’s crop
- Ad hoc government payments
- Improved grain ending stocks in the U.S.
- Lower costs for fuel and interest
Trump’s Priorities and the Impact on Ag
The January Ag Economists’ Monthly Monitor released this week asked which of Trump’s priorities will have the most negative impact on agriculture. Seventy-nine percent said it’s trade and tariffs. Twenty-two percent said border security and deportation.
When asked which of the president’s priorities would have the most positive impact on agriculture, 54% of economists said cutting regulations, and 38% said tax changes.
Tariffs on the U.S.'s top three trading partners could have a major impact on agriculture. The January Ag Economists’ Monthly Monitor asked economists which input is most at risk. The top answer was fertilizer.
“From a headline standpoint, it’s probably potash,” says Samuel Taylor, farm inputs analyst, Rabobank. “We get 85% to 90% of our potash from imports from the Canadian market. The residual is made up by Russia and Israel, in principle, with some other markets coming in.”
Direct Payments to Farmers
As USDA noted in its 2025 net farm income forecast this week, Congress included economic aid for farmers in the continuing resolution (CR). The “Economic Loss Assistance Program” earmarked $10 billion in direct payments for farmers, which is expected to improve the net farm income picture this year.
Farmers are still waiting for the payments from USDA, but it’s been called a “cash infusion” into the farm sector.
The January Monthly Monitor asked economists if those payments were needed in agriculture. Sixty-four percent said yes, and 36% said no.
In the survey, of the economists who said the payments were needed, some of the reasons why include:
- Land values continue to climb
- Input costs will remain elevated and inefficient farmers that overleveraged themselves the past couple years will remain in business
- Delays producers cutting fixed costs, especially cash rents
But not all economists agree the payments were needed, warning of some unintended consequences, including prolonging what some economists argue are adjustments needed in the industry. In the survey, economists said:
- “I think there could be some pushback when the longer-term farm bill comes up for authorization with budget hawks pointing to the $10 billion as a down payment of sorts.”
- “This will slow some adjustments that arguably are needed. For example, land rents are generally higher than can be justified by current market returns. Getting approval for another round of payments in 2025 is far from certain, so unless markets improve considerably, there could be a renewed financial squeeze in 2026.”
Future of the Farm Bill
The Senate and House leadership for both Ag Committees have made clear they want to see a farm bill early this year. Fifty-seven percent of economists think it will be the second half of this year before Congress passes a new farm bill. Twenty-nine percent say 2026, and 14% of economists still think Congress will pass a new farm bill the first half of 2025.
45Z and Impact on Farmers
In the Biden administration’s final days in office, USDA finally released an interim rule establishes guidelines for quantifying, reporting and verifying the greenhouse gas (GHG) emissions associated with the production of biofuel feedstock commodity crops grown in the U.S.
The Treasury Department and Internal Revenue Service (IRS) also issued preliminary guidance on the 45Z tax credit in January, which was created by the 2022 Inflation Reduction Act (IRA/Climate Act), including the addition of sorghum as a crop that could qualify as a feedstock for a fuel that can claim the 45Z credit if certain climate smart agriculture (CSA) practices are followed.
The Treasury also released a notice that provides the emissions rate table for the 45Z credit.
The January Monthly Monitor asked if the rule becomes final, when it could impact farmers and ethanol producers. Fifty-five percent said it could impact them as soon as the second half of this year.
Trump’s Key Cabinet Picks
The future of 45Z is now up to the Trump administration.
Late last month, Brooke Rollins, Trump’s nominee for Agriculture Secretary, powered through her confirmation hearing in front of the Senate Ag Committee. The Senate still needs to vote on her confirmation, but no timeline has been given on when that vote will happen yet.
Eighty percent of economists in the January Ag Economists’ Monthly say if confirmed, Rollins is a positive pick for U.S. agriculture.
- “Rollins knows ag and has Trump’s ear,” said one economist.
- “Her close connection the president and reasons outlined in the letter sent by 427 ag organizations and businesses on Jan. 15,” said another economist.
Twenty percent of economists say Rollins wouldn’t be positive for U.S. agriculture.
One economist said, “USDA focused heavily on under-served producers during the Vilsack era and my sense is that producers wanted the Secretary to come from a production ag view; whereas Rollins comes at it more from an overall domestic policy view. Also, I feel the administration isn’t helping her out with the Deputy Secretary nomination. Producers don’t see themselves in the upcoming USDA leadership.”
However, economists aren’t as confident that Robert F. Kennedy Jr., Trump’s pick to lead the Department of Health and Human Services, will be a positive for U.S. agriculture. Ninety percent of the economists surveyed said no.
One economist said, “His disrespect for science is troubling.” Another economist weighed in by saying, “His positions on crop protection will be an interesting storyline to watch early in 2025.”
However, not all economists think RFK Jr. would be bad for agriculture. In fact, one economist thinks he could actually restore confidence in agriculture.
“Improving health outcomes, even if over a longer time period, should improve the consumer opinion of agriculture and be a net gain overall,” one economist said in the anonymous survey.
