We’d like to say with some certainty what 2025 will bring, but we’re in an uncertain time.
The market is extremely volatile, and supply chains are being disrupted with increased costs for producers and consumers. We like to think we’ve learned some lessons from past experiences.
Lessons Farmers Can Apply in 2025
1.) We have to look at domestic markets more intensely. But a domestic market can’t use the supply of corn, soy, cotton, or other commodity crops we are able to grow with precision ag.
Alternative crops may be more profitable in 2025. There will still be a demand for corn and soy, especially for animal feed and biofuels. But it’s unlikely that the domestic market can absorb the entire production without considering export and storage options.
2.) Consumers are reading labels and asking for healthier foods. This next year might be a good time to reconsider the monocrops you’ve grown in the past. It’s also a time to examine your farming practices and how you could tweak them to maintain farm profit while converting to a more sustainable operation. Inputs are just going to get costlier.
We don’t usually look at youngsters when discussing business decisions. But members of Gen Z and Gen Alpha (13 years old and younger) are vocal and affect household buying decisions. That trickles down to how much demand there is for soy or corn for ethanol or corn syrup for consumer packaged goods. These are huge markets for commodity growers, and their growth rates are declining faster than production rates are rising.
3.) It will be a long time before all the cars on the roads are electric. Some estimates say it will take another 30 to 40 years before current gas or hybrid cars are retired. (1)
If you continue growing corn and soy for that market and pass your farm down to the next generation, they will have to pivot. Although there’s still a robust market for corn and soy, in the foreseeable future, it is a shrinking market.
How does this affect your ag operation? A lot depends on the size of your operation, the crop insurance you bought, and the supply and demand in your area. We’ve had three tough market years in a row, which will affect the cash flow of smaller operations significantly.
Tighter Margins in 2025? There’s Less Risk in Change
Two occupations are extremely risk-averse: farmers and bankers. It will be hard to convince a banker your farm is going to be profitable in 2025 if you’ve had 2 or 3 years of struggles.
What changes can you make so your farm operation will be in the black this year? A good sales plan that mitigates risk by diversifying crops is a good start. Diversification isn’t on the minds of most large corn, soy, cotton, or other commodity growers. But it needs to be.
Production costs for most commodity crops are well above historical averages. It’s going to be difficult for many producers to cover costs, let alone make a profit with the usual crops. And that’s even with futures markets forecasting slight price increases. These futures don’t consider politics and policy, which is changing almost daily.
Rural communities depend on the success of the surrounding farms. Is it time to start talking about alternative crops at the local cafe? We know the social pressure to conform in a rural community is intense (we live in them!), but when everyone’s in the same sinking ship, there’s room for change.
For Higher Profit Margins, What Would You Change?
Isn’t that the question of the hour?
If you’ve done a thorough market analysis and have considered potential political actions in the coming months, you already have a good idea where you can pivot. Some markets are growing, and if your operation can meet those demands, you can leave a strong legacy for your grandchildren.
While markets are uncertain, some things remain constant. People need to eat, have shelter, and be clothed. What can you produce that will meet human basic needs? It’s a simple question with a complex answer.
The traditional ag industry hasn’t asked that question in a generation or two. Furthermore, the question is more complex because consumers are not only asking what food, shelter, or clothing will be produced, but how. Your response must supply the product in a form that is in demand. Regenerative farming practices check most of the boxes for the growing markets.
A whole generation of environmentally conscious consumers is opting out of GMOs, synthetics, and CAFOs. The new Gen Z American consumer is young but already has a buying power of approximately $360 billion. Don’t discount those kids who may still be living at home. They influence their parents’ purchasing decisions to the tune of up to $500 billion.(2) (3)
Why does this matter to you on the farm? Well, the processor you’re selling to is creating products that meet the demands of those consumers. How many millions of regenerative acres do the large companies directly or indirectly support? Cargill, Kellogg’s, and General Mills all have regenerative supply chains in place, contracting for over 1.5 million acres. This does not include the international projects aimed at advancing sustainable agriculture.
Are you supplying these expanding markets? Or, are you growing for the shrinking ethanol and CAFO markets? These companies, and many others, are meeting consumer demands, with or without US farmer products.
What would your profit margin be with a regenerative operation that used fewer inputs and sold to a growing market at a higher price point?
If you’re interested in growing your ag operation and becoming profitable, contact our team at STBilogicals.com. We’re here to help you succeed. When soil speaks, we listen.
