‘Resilience’ is agriculture’s keyword for 2025
In 2025, resilience strategies will distinguish leaders in agriculture. The globalized nature of today’s food system places U.S. agriculture at a stressful crossroads as geopolitics grows more volatile, compelling agribusinesses to adapt or risk falling behind. In this high-stakes environment, resilience has become the cornerstone of success. Agricultural businesses can pivot risks into opportunities and drive innovation by integrating resilience metrics into risk management plans.
Resilience refers to the ability of farms and agribusinesses to recover from disruptions and adapt to changing circumstances. While the 20th century focused on intricate, just-in-time supply chains, recent events like the COVID-19 pandemic, severe droughts, and volatile trade relationships have highlighted the need for resilience. These disruptions heighten concerns about food supply chain vulnerabilities, financial stability, and resource management. Agricultural operations can respond by developing strategic plans that mitigate risks to ensure long-term financial gains.
Agricultural businesses should keep key metrics readily on hand to gauge the need for additional risk management measures. First, regularly monitoring financial metrics equips businesses to protect stability and foster resilience, such as cash flow and liquidity ratios. Maintaining financial buffers, like emergency funds or credit lines, provides critical flexibility in crisis scenarios. Similarly, a balanced debt-to-equity ratio prevents excessive leverage while supporting growth and innovation. Land-grant universities assist U.S. producers in identifying and developing these key metrics through expert farm management specialists.
Similarly, agricultural businesses would benefit from monitoring the flexibility of their operational efficiency. Diversifying supply chains can increase resilience by reducing dependence on single suppliers or markets, safeguarding against disruptions like trade restrictions or logistical challenges. Additionally, tracking inventory turnover rates ensures that resources are managed efficiently while maintaining the ability to adapt quickly to demand fluctuations. A well-managed supply chain and inventory system provide the agility to respond to opportunities and risks, ensuring that operations remain robust in uncertain conditions.
Environmental health underpins agricultural resilience. Soil health indicators, such as organic matter content and erosion levels, enhance natural defenses against droughts, pests, and diseases. Land grant colleges can provide assistance with soil testing to develop a more efficient soil fertility program. Improving water use efficiency will also become a growing challenge. Technologies like precision irrigation or drought-resistant crops can mitigate risks while reducing costs and environmental impact.
Ultimately, a firm’s resilience depends on the people driving its operations. Workforce adaptability remains paramount, particularly as demand for skills like quantitative expertise grows, as highlighted in Purdue University’s recent Agricultural Job Market Report. Notably, approximately a third of all posted agricultural jobs require advanced data science and analysis skills, with signs pointing toward additional data science needs in the future.
Building resilience into risk management plans requires embedding agility and absorption capacity into decision-making frameworks. Absorption capacity focuses on a farm’s ability to withstand shocks, such as maintaining low per-unit fixed costs, diversification, and a strong balance sheet. Agility emphasizes flexibility, including clear goals, openness to new opportunities, and regular assessments of competitive positioning. Leveraging technologies like AI and IoT enhances monitoring and response capabilities. Strategic tools such as these ensure plans evolve with emerging risks.
In 2025, many agricultural businesses will discover how well they have embedded resilience into their operations, securing their future in an unpredictable world. A resilient agricultural sector is mission-critical for the well-being of rural America and the broader economy.
Producers would do well to take the first step today by critically evaluating their risk management plans with resilience as the central focus. In a world of growing uncertainties, resilience planning can represent the gateway to innovation and long-term growth or the end of a multi-generational agricultural business.
Editor’s note: Trey Malone is the Boehlje Chair in Managerial Economics for Agribusiness at Purdue University and was recently the agricultural economist at the University of Arkansas. The opinions expressed are those of the author.