As we look at the factors driving the U.S. economy in the first half of 2025, one of the most prominent topics is tariffs. The threats of, implementation of, and retraction of tariffs have influenced stock market movements and business purchasing decisions, with many companies building up inventory in Q1. This surge in buying activity led to an increase in imports, as businesses attempted to get ahead of looming tariffs.
As a result, the spike in imports temporarily contributed to a contraction in real GDP growth. With negotiations still ongoing, the long-term impact of tariffs on the U.S. economy remains uncertain.
Another key issue is unemployment. The U.S. Bureau of Labor Statistics reported a May unemployment rate of 4.2%, unchanged from April. Unemployment is expected to rise through mid-2026, peaking at 4.9%, before declining in 2027 as population and labor force growth slow.
Consumer Price Inflation decreased from 3.1% core inflation in Q1 2025 to 2.8% in April. Broad-based tariffs are expected to push inflation to 3.6% in Q3 2025, peaking at 3.8% in Q2 2026. As tariff effects filter through the economy, core inflation is anticipated to decline by the end of 2027.
The trajectory of the unemployment rate, along with the inflationary impact of tariffs, will be key factors in the Federal Reserve’s (Fed) approach to interest rate policy. With upcoming meetings scheduled in July and September, the Fed is being closely watched after holding rates steady since December 2024. Current estimates suggest the Fed will aim to reduce rates to a range of 3.25%–3.5% by mid-2026.
No discussion of the U.S. economy would be complete without mentioning The One, Big, Beautiful Bill. Having passed the House and now under debate in the Senate, the bill proposes to drive economic growth through tax policy changes, adjustments to Medicaid, and increased military spending. If enacted, its impact will be closely monitored—particularly regarding its promises of growth and the resulting implications for the federal deficit.
Dairy
In 2024, the U.S. recorded $8.2 billion in dairy exports, marking the second-highest export value on record. About 16% of all milk solids were exported, with Mexico and Canada accounting for more than 40% of total U.S. dairy exports. Current global prices for butter and cheese remain competitive, supporting continued export growth.According to the USDA, the average price for a dairy herd replacement cow ready to enter the milk barn reached $2,870 in April, up from $2,120 a year earlier. With positive margins and a shortage of replacement heifers, producers are holding onto cows for longer lactation cycles. From January to April 2025, the U.S. dairy herd grew by 70,000 milk cows, driven by reduced slaughter rates.
Beef prices are expected to remain elevated, boosting both calf and cull cow prices—significantly enhancing revenue streams for dairy producers. However, if margins weaken, cull rates could rise.
The futures markets have seen volatility due to trade and tariff uncertainty, as well as ongoing reforms to the Federal Milk Marketing Order (FMMO). Nonetheless, U.S. dairy margins are projected to rebound in the second half of the year. As of late May, the 12-month average futures prices for Class III and Class IV milk were $19.17 and $19.34 per cwt, respectively. April margins, calculated through the Dairy Margin Coverage (DMC) program, were forecast at $10.31 per cwt—expected to be the year’s low, with margins projected to rise above $13 per cwt by year-end.
Pork
The market hog price rally and improved producer margins that began in the second half of 2024 have continued into 2025. The outlook for the remainder of the year presents strong opportunities for producers to lock in profits through hedging, with futures contracts for July and beyond reaching contract highs as of early June.The Pork Cutout value has remained strong, sitting at $111 per cwt, while the Lean Hog Index reached $97 per cwt, its highest level since August 2023. Cash hog prices are currently over $100 per cwt. In contrast, prices for weaned pigs and feeder pigs have declined by roughly 50% from Q1 highs but are now within a more typical range.
April estimates from Iowa State University show positive hog profits for farrow-to-finish operations for the 13th consecutive month, though profitability continues to vary based on productivity, hedging strategy, and packer contract index.
While feed costs have been favorable, with strong corn and soybean meal margins, rising non-feed costs have limited profit potential. As of March 1, 2025, both the breeding herd and market hog inventories were down slightly year-over-year, supporting higher prices. The average number of pigs per litter held steady at a record 11.65, despite some disease challenges.
On May 6, the National Pork Board launched a new digital marketing campaign, Taste What Pork Can Do™, aimed at younger consumers. The campaign highlights pork’s flavor diversity, health benefits, and versatility, seeking to boost domestic demand, which remains a key focus alongside generally stable export demand, despite trade uncertainties.
Corn and Soybeans
The 2025 U.S. corn and soybean crops are now in the ground, and early reports from key producing states indicate strong crop conditions. The June 9th NASS report shows high ratings in Iowa and Illinois, though Michigan lags due to delayed planting and wet conditions.
The June WASDE report for corn shows little change from May. A record U.S. supply is forecasted, with 15.8 billion bushels of production, driven by more acreage and higher yields. If realized, the 95.3 million acres planted would be the highest in a decade. Despite strong domestic use and modestly higher exports, the season-average price remains steady at $4.20 per bushel.
The June soybean outlook also remains mostly unchanged. For 2025/2026, lower supplies and reduced exports are expected to be offset by higher domestic crush demand, resulting in lower ending stocks. Planted acreage is expected to shift from soybeans to corn. Based on trend yield, total production is projected at 4.34 billion bushels, with domestic crush up 70 million bushels from the prior year. Ending stocks are forecast at 295 million bushels, down 55 million from 2024/2025. The season-average price is estimated at $10.25 per bushel, up from $9.95.
Export uncertainty remains top of mind for grain producers. With the tariff pause against China set to expire on July 9, market watchers are awaiting clarity. Meanwhile, Brazil is expected to produce its second-largest corn crop on record. However, strong domestic demand may limit its export capacity, allowing the U.S. to maintain its position as the world’s top corn exporter.
To view the summer 2025 issue of Partners magazine in its entirety, click here.
