by Blair White

One of the best pieces of generational advice is not to borrow tomorrow’s trouble. If only that could be applied to agriculture. Before one crop year concludes, farmers and ranchers have no choice but to start thinking about tomorrow, about next year. You can’t sugarcoat it; we are living in the most challenging economic and political conditions for agriculture since the 1980s.

Bart Fischer, Ph. D., is no stranger to the struggles of production agriculture, and he is more familiar than most with the policy that shapes growers’ operations each year. The Cambridge-educated Co-Director of Texas A&M’s Agricultural and Food Policy Center spent his formative years with his boots in the dirt of Southwestern Oklahoma on his family’s cotton, cattle, and wheat operation. He still plays an active role in the family farm today. Fischer began his career in Washington, D.C., and was involved in developing the 2014 and 2018 Farm Bills. He also served as Chief Economist to two Chairmen of the House Agriculture Committee. Fischer has a unique perspective on agriculture as a producer and an industry professional.

While it would take many more pages to list all the factors influencing the 2025 agriculture outlook, it can be definitively said that agriculturists are still dealing with the lingering effects of inflation, sky-high production costs, and stalled-out farm policy. The question everyone is asking today is, what can we do about it?

“It is still entirely possible for us to set the stage for 2025,” Fischer said, “but to do it in a way where growers have the tools to navigate it.”

The Cost of Production

When the government infused trillions of dollars into the U.S. economy during the pandemic in 2020 and the years following, the action had an unprecedented effect on inflation. Now, nearly five years later, farmers are experiencing historically high input costs due to inflation that has only recently leveled out.

“The trillions in stimulus have unquestionably had an effect,” Fischer said. “The flip side is that for agriculture, some of that spending was absolutely vital for stabilizing operations.”

In August 2020, the U.S. inflation rate was 1.3%. Inflation reached its peak in June 2022 at 9.1%. In September 2024, we experienced an inflation rate of 2.4%. While decreasing inflation rates are welcome, Fischer says that only looking at current rates ignores the fact that the actual cost of goods, like farming inputs, is still exponentially more expensive today. Unfortunately, a decrease isn’t necessarily in sight.

“We are celebrating the fact that inflation is stabilizing at 2.4%, but that ignores the fact that costs have exploded over the last several years,” Fischer said. “While the inflation rate may be slowing down to normal levels, we are living with those elevated prices. They aren’t coming down; the rate of increase is just slowing.”

Fischer says managing input costs will be essential in 2025 despite the difficulty of the task.

“It’s about finding your way through that cost-price squeeze that is all to familiar in agriculture,” he said. “That’s the name of the game – managing costs. The challenge here is that there’s only so much producers can do. It will be a matter of their risk appetite and how close they want to stick to their rotation. It’s largely a question of how much am I willing to put out there and risk on the prospect that prices might go up during the growing season?”

Historically, growers have had to increase the size of their operations each year to survive and weather the rising cost of production. Current expenses may be a roadblock for many when it comes to expansion next year.

“When I talk to people who aren’t involved in production agriculture both in and outside of D.C., the answer to them is seemingly simple – if prices are low, you cut back on production,” Fischer said. “That sounds great, but if that’s your livelihood and if you don’t plant something, then you don’t make anything to feed your family. It sounds nice in a textbook, but in reality, it doesn’t work. I know growers will be looking to cut costs where they can. That dynamic hasn’t changed over the last two to three years, and it likely will be even more pronounced in the new year.”

Inflation and the rising cost of production increase agriculturists’ sensitivity to low commodity prices because the margins are slim. Typically, whatever is lost in commodity price must be compensated for in yield or by increasing production. Unfortunately, that strategy may not be an option in the current economic climate.

“In agriculture, in particular, input costs are notoriously sticky,” Fischer explained. “They go up and don’t come down. Prices have come down 20-30% over the last two years, but costs are stagnant. How can you make it? One, you hold on for dear life; two, the federal government plays a role; and three, you hope for above-average crops. It’s a lot harder to figure out when there’s no buffer.”

Price Outlook

Another critical factor on the horizon is the cotton price outlook for 2025. Fischer explained that cotton prices still have time to rebound, which could make the outlook for next year more palatable. Recent trends, however, show a continued decrease. Cotton prices have fallen 28% since 2021, 22% from 2022-2024 alone. Monitoring the futures market can help growers prepare for next year.

“That’s the number to be most concerned with – where do prices go? We went into the 2024 growing season with a price of 83-84 cents per pound on insurance, so if it doesn’t rebound between now and the spring, growers are looking at being able to insure a price that’s well below their cost of production and well below their break even,” Fischer said. “As challenging as the last couple of years have been, we haven’t started that low, so that adds a new challenge.”

It’s too early to say whether cotton prices will work in favor of producers next year. World cotton production is expected to increase next year and even outpace mill use (USDA). An oversupply of cotton could cause prices to drop even further. At the time of this article, year-over-year world-ending stocks are projected to be at their highest levels in five years.

While the U.S. agriculture industry urgently needs a farm bill, Fischer said the legislation won’t impact the market and is not designed to. Market prices are dictated by factors like consumer demand, inflation, commodity surpluses, and more that weigh on market fundamentals. Instead, the farm bill would provide the support many agriculturists need to stay in business.

“A farm bill is not designed to shift the market,” Fischer explained. “It’s designed to come alongside the grower, acknowledging that this is a precarious business, and give growers the confidence that if they decide to stay in farming, they won’t be forced out of business. We don’t want farmers going out of business in mass. A new farm bill gives growers the confidence to carry on in their operations.”

Government Support

All eyes are on the Hill in Washington, D.C., waiting for a farm bill to be passed. One thing growers should remember for 2025 is that funding hasn’t come via the farm bill in the last few years—it has come through ad hoc assistance through the appropriations process. Will a farm bill help? Yes. Will it fix all the problems we see creeping into 2025? It’s not likely.

“If you look at direct government support to producers, it’s at the lowest level since 1982 during the height of the farm crisis,” Fischer said. “We are in a situation now where commodity prices have collapsed but the farm bill is languishing. It’s hard to get anything done because there is much work to be done, and there is so much dysfunction in Washington, D.C. With that said, there seems to be growing acknowledgement in D.C. about bleak economic conditions in rural America. Whether it’s a new farm bill starting in 2025, economic assistance for 2024, or natural disaster assistance for 2023 and 2024 – or some combination of those three things – I’m hopeful that Congress will be able to deliver some level of support before the end of the year.”

One challenge of current farm legislation concerns ARC and PLC’s income support programs. According to Fischer, the support levels on those programs make Title One increasingly irrelevant for farmers whose sole income is farming.

“The reality is, very little support is kicking in, and when it does kick in for many full-time family farmers, the support levels are so disproportionate to the risks that they face that it is not going to provide a level of support that would keep them from going out of business,” he explained. “I don’t want to undersell a new farm bill. It can absolutely, unequivocally help, but how much it helps will depend on how much the reference prices and payment limits are increased.”

What You Can Do

Other than fighting the good fight and weathering the storm, one action growers can take to help agriculture gain support is to tell their stories to their legislators.

“Growers have to be conveying their concerns to their policymakers,” Fischer expressed. “There is absolutely no substitute for a farmer or rancher telling

their story themselves. You don’t have to talk to the members of Congress; you can talk to the staff. Tell them exactly what it’s like for you on your operation, exactly what you are facing, and how hard times are. Insist that something gets done. You may hesitate to call because you think your member knows this. That member may know it, but they may not be aware of the sense of urgency, and urgency is what gets things done in Washington, D.C.”

Next year may already be setting up another sizeable challenge for agriculture, but if growers and other agriculturists demand change, the probability of navigating the churning waters increases.

“Everything we do is challenging, but there’s a tremendous amount that’s rewarding about production agriculture,” Fischer said. “There’s also a tremendous amount of risk, but we will find our way through it now and we will find our way through it next year, too. For the sake of our nation’s producers, I prefer that we do that in a coordinated manner with sound farm policy.”