US Economic Outlook:
The One Big Beautiful Bill Act (OBBB) (H.R.1.) was passed into law July 4, 2025, and with it came a number of adjustments to spending throughout the United States. According to Farm Bureau, the OBBB passage represents a win for agricultural operators with an increase in core safety net programs, continued availability of risk management tools, and permanent law-based tax provisions. The bill, according to the Congressional Budget Office, is projected to increase agricultural spending by roughly $66 billion over ten years. A new Farm Bill is still desired but, in the meantime, the OBBB provides a stop gap to continue funding protective measures and environmental programs.
Besides the OBBB, tariffs have been headline grabbing after April 2nd which President Trump declared liberation day when he implemented sweeping tariffs at a universal rate of 10% on virtually all U.S. imports, along with a reciprocal rate reaching as high as 50% for certain countries based on preexisting agreements. The policy goal as stated was to make trade balances and agreements fairer for the U.S. and return manufacturing to the U.S. The import taxes would also be a way to raise revenue while also accommodating some of the tax cuts from the OBBB.
The overall impact of tariffs on the economy will take time to pan out and be quantified. In the near term, these policy implications are, at least in part, impacting the Federal Reserve (Fed) and decisions made regarding interest rates. During the most recent September 2025 meeting, the Fed elected to cut rates by 25 basis points to the range of 4.00% to 4.25%. This was the first rate cut since December of 2024, likely attributed to the recent uptick in the unemployment rate. Fed officials have indicated two more rate cuts coming this year with potentially one more in 2026 pending the balance between inflation and unemployment.
The monthly jobs report is another key economic indicator used by the Fed as part of its rate-making decision process. Throughout the first part of 2025, the report indicated continued strength in employment, which was one reason for the Fed to hold off on any rate cuts. The barometer, however, dropped in July for the first time. The July 2025 jobs report showed slowing job growth with just 73,000 jobs added. Expectations were for 104,000 jobs, which indicates a slowdown from expectation. Additionally, May and June’s job totals were revised down by 258,000 jobs. This increased the unemployment rate slightly to 4.1%.
Corn and Soybeans
The August 2025 WASDE report reveals a historic surge in U.S. corn production. The USDA projects 2025/26 U.S. corn production at a staggering 16.7 billion bushels, up 1 billion from July’s forecast and marking a 13% increase from 2024. If realized, this would surpass the previous record set in 2023/24 by 1.4 billion bushels. This leap is driven by an increase in harvested area and a record-breaking yield of 188.8 bushels per acre, up 9.5 bushels from last year.
Despite a slight dip in beginning stocks, the surge in supply pushes ending stocks to 2.1 billion bushels, the highest since 2018/19. The season-average farm price is lowered by 30 cents to $3.90 per bushel, offering relief to buyers but pressuring margins for producers. Total U.S. corn use for the 2025/26 season is projected to increase, reaching a total of 16 billion bushels. This growth is driven by several key factors including feed and residual use, ethanol production, and exports being projected to hit a record 2.9 billion bushels.
The USDA’s August WASDE report presents a mixed outlook for the 2025/26 U.S. soybean market, characterized by lower supply and tighter ending stocks, yet stable pricing. Production is forecast at 4.3 billion bushels, down 43 million from July, largely driven by a 2.4 million acre reduction in harvested area. However, yield is revised upward to 53.6 bushels per acre, an increase of 1.1 bushels from last month and up 2.9 bushels from last year. Exports are lowered by 40 million bushels amid a slow pace of sales. Ending stocks are now projected at 290 million bushels, down 20 million from July. Despite these supply adjustments, the season-average farm price remains steady at $10.10 per bushel.
Dairy
Dairy producer margins improved in June as forecasted, with margins of income over feed costs calculated through the Dairy Margin Coverage (DMC) program up to $11.10/CWT. This marked a $0.70 increase from May and was influenced by lower feed prices. Despite margins being well below the highest DMC margins recorded in 2024, the June results were well above the $9.50/CWT threshold for potential DMC payouts. Futures markets anticipate solid income over feed margins for the remainder of 2025 and into 2026 as feed prices are expected to remain moderate. WASDE Crop Production Reports showing this might be the largest corn crop ever should lead to plenty of available feed for dairy producers. In addition, strong beef prices continue to post record highs and will continue to be a larger source of revenue for producers. These solid economics point to additional milk production in the months ahead.
Despite lingering trade uncertainty, exports continue to play a vital role in moving product. Cheese shipments reached a record high of 115 million pounds in June, and butter exports totaled 14 million pounds, which is up 100% over the 2024 pace. U.S. suppliers have been able to satisfy increased cheese demand in key growth markets across Latin America and Asia due to favorable trade agreements and geographic location. Cheese supplies domestically are plentiful as milk production continues to expand, and newly constructed cheese facilities add to total output. The increased milk production has led to a 10.4% year over year increase in butter production and a 4.2% year over year increase in cheese through June. Exports have become a significant outlet for the U.S. as almost 9% of the 7.26 billion pounds of cheese produced in the first half of the year was exported compared to 5.1% a decade ago. Stronger world prices in Europe and Oceana should keep a floor under U.S. prices, and any gaps will continue to help clear product.
Pork
Wholesale pork values and market hog prices have remained mostly steady, above average, and at profitable levels for producers throughout the second quarter and thus far through the third quarter of 2025. Cash hog prices have been over $100 per lean CWT for the past few months, and the Pork Cutout has been over $110 per lean CWT over the same time period. This has supported cull sow prices, and weaned pig and feed pig prices. This price strength, coupled with lower feed ingredient costs, particularly corn and soybean meals, has extended profitability for most producers. Iowa State University reported an estimated July profit over margin of $51 per head for farrow-to-finish hog operations, the 16th straight month of profitability and an $8 increase from June. CME futures contract prices for lean hogs and feed ingredients continue to show profitable “crush margins” over the next 12 months. Many producers continue to extend coverage under hedging strategies including LRP/LGM, forward contacts, and futures, and options positions to ensure some of those profits are realized. Summer heat has significantly slowed market hog growth and reduced weights. While this is a normal trend, it has been more impactful this year than recent years. High retail beef prices have been supportive of pork value, while domestic demand has been firm, but consumption is relatively flat. Exports have fallen back roughly 6% from 2024 record export levels due in part to uncertainty around trade deals and tariffs, and very little export sales to China.
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