Black Swans 2025: A Year of Headwinds, Adaptation, and Preparedness for the Agribusiness Industry
As another new year approaches, we are sharing our predictions for the 2025 Agribusiness Black Swans — major events having the most impact in the coming year — along with our suggestions for how to prepare and adapt as your team heads into 2025, write Bob Trogele and Jim Sulecki at CropLife’s sister brand AgriBusiness Global. Some of the key watchouts for 2025 have intensified, new ones have developed, and others have de-escalated. Business leaders and owners who prepare and adapt their business models will likely do well in the marketplace
Black Swan 1: Agroindustry Stagflation Continues in 2025
Stagflation means a combination of inflation and economic stagnation. In point of fact, expect commodity prices to be relatively flat overall. Meanwhile, price patterns suggest a potential for multiple years of lower farm income unless input costs, interest rates, land prices, etc. readjust dramatically, or else weather events cause shortages. While we believe the marketplace and competition are likely to make these adjustments, overproduction of grains continues, and the supply of inventory (the stocks-in-use ratio) has remained slightly higher than 2023. At the same time there have been declines in input costs, with prices for seeds and pesticides stabilizing while fertilizer and fuel are the likeliest to decline.
Key Questions
How long will the input industry continue to finance Brazilian growers with long payment terms? Brazil producers have taken the global lead in exports for corn and soybeans. Will they continue to target more market share, perhaps by aligning with the other BRICS countries, especially China? Most suppliers are struggling with profitability, and the Brazilian model is causing major headaches.
Will the cost of capital continue? There’s a bigger picture here that further dampens the ag sector. With U.S. national debt remaining at an all-time high and interest rates showing few signs of coming down significantly, the U.S. federal government is crowding out the private sector in the pursuit of spending and borrowing. This combined with the continued higher cost of money creates a difficult environment for ag businesses looking to make capital investments. This is especially true for small business owners as producers.
Will the economic outlook be recovery or more of the same? Late-year forecasts show inflation softening and economic forecasts revised upwards. For instance, one Citibank estimate for 2024 global GDP growth was 2.1% in March but up to 2.5% by September. The Euro Area went from a forecast of 0.3% to 0.7%. For the U.S. it was 1.4% to 2.2%. Look ahead to the 2025 forecast, however, and global GDP growth is estimated to stay at 2.5% while the U.S. is forecast to drop to 1.8%. It would be tempting to assume near-term gains will continue into 2025, but that may not happen.
For more “Black Swans”, visit AgriBusiness Global.
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