Cooperatives: What We Expect to See in 2025

By Mark A. Rodruck, CPA, Partner

As we wrap up a successful but challenging 2024 and look ahead to 2025, it’s clear that the agriculture industry, like many others, will face a number of challenges and opportunities. Key factors such as staffing concerns, rising fixed expenses, shifts in the political landscape, and the potential sunset of Section 199A(g) and other beneficial tax laws at the end of 2025 are all important considerations for companies making strategic decisions.

At our firm, we stay deeply involved in your audits, board meetings, strategic planning sessions, and management discussions. While time often proves predictions wrong, we find value in attempting to look forward. Based on our ongoing engagements, here are some of our thoughts for 2025:

Earnings

Moving into 2025, we expect local earnings to struggle, possibly trending downward. Grain yields varied by region, but the corn harvest was mostly dry, leading to less drying income. While many have increased rates, it seems producers are selling this crop faster than the prior year, which impacts grain storage income. With farm profitability at decade lows and crop inputs remaining elevated, producers will carefully weigh inputs based on potential yield increases. They will also turn to generics to help lower input costs. On the positive side, low crop prices have softened feed costs for livestock and dairy producers, potentially creating growth opportunities for feed departments positioned to handle increased demand. Pressure from increased competition from larger companies has already proven to change the marketplace in retail energy and C-store activities, and that trend appears to be increasing.

Regional cooperatives, having benefitted from record-breaking years, may see earnings moderate, with lower rates already announced by some of the larger regional cooperatives. This may prompt reflection and a potential reevaluation of current margin structures to ensure long-term sustainability.

Capital Expenditures

We anticipate continued investment in grain and agronomy projects throughout 2025, focusing on technology, efficiencies, and better serving your members. These investments will help companies adapt to market pressures and create long-term value in a changing environment. Upgrades of rolling stock will continue, with increased prices potentially changing the timing of some acquisitions.

Expenses

After a period of rapid growth in labor costs, we expect the labor market to stabilize, though costs may remain elevated compared to historical norms. We anticipate many will make changes to improve efficiency and reduce overlap to help manage personnel costs in the coming years. Additionally, while insurance premiums may have peaked, many companies will still seek ways to mitigate these rising costs, such as exploring captive insurance models to manage risks more effectively.

Credit Risk

Though we haven’t seen a dramatic increase in bad debt write-offs, some accounts receivable are beginning to age, which could become a concern if farm profitability continues to trend downward. It’s a big task, but it’s essential to continue your collection efforts and stay vigilant in enforcing your credit policies, along with evaluating partners for input financing.

Fraud and Cybersecurity

As threats become increasingly sophisticated, the risks to your company continue to grow. Investments in cybersecurity training, technology, and threat assessments will be essential to safeguarding your operations. Penetration testing and updating security protocols will be key to staying ahead of evolving threats.

Mergers and Acquisitions

It seems that the appetite for mergers in the countryside is slowing, but companies continue to search for unique ways to work with peers and maximize efficiencies.

Despite the challenges, the future of agriculture remains bright. The agricultural sector has long demonstrated resilience, adapting to changing circumstances while continuing to drive efficiency, growth, and profitability. As always, we are excited to work alongside some of the most dedicated people in the industry and help guide you through the opportunities and obstacles that 2025 will bring. We look forward to continuing our partnerships with current clients and building relationships with new ones. Together, we will navigate the evolving landscape and continue to thrive in an ever-changing industry.

Here’s to a successful 2025!