Profitability How will agribusiness deal with increasing costs and outsized risks? Strong risk management. Cost pressures will continue in 2025, and agribusinesses are feeling the pinch. 2 3 Increasing labor costs and changing weather patterns are affecting the bottom line. Energy prices are also rising, as power needs are expected to increase faster 4 And at the same time, commodities prices than inflation. are falling, especially for corn, wheat and soybeans.5 While many large food and beverage conglomerates are highly profitable, it’s more of a mixed picture for smaller companies. Forestry operations and wood products manufacturers In the forestry and wood products sector, industry profits can improve their risk profiles to cut insurance costs. are often dependent upon the construction industry, which has struggled with high interest rates, although the And when it comes to insurance, many agribusinesses outlook for construction is cautiously optimistic. Lumber are underinsured: Eight in 10 agribusiness respondents prices, which have fluctuated wildly in recent years, have to the HUB survey say they don’t have enough insurance 6 coverage to protect against risks that hurt profits. stabilized. Not all of these challenges are surprising to the industry. This is likely a result of rising costs of the coverage and According to the HUB International's 2025 Outlook shrinking available coverage. Working with an experienced 7 insurance broker in the agribusiness industry can help Executive Survey, 65% of industry respondents listed greater expenditures as a top concern for 2025 profits, mitigate premium hikes, secure the right coverage and the most commonly chosen reason, ahead of cybercrime, help boost profits. disruption to business operations and climate change. In the face of these concerns, all agribusinesses will 2. University of Illinois Farm Doc Daily, “Rising Overhead Costs Driven need to take risk mitigation and cost-saving measures to by Labor and Interest,” December 19, 2023. increase profitability. For example, sophisticated inventory 3. Green Money, “Weather’s Impact on Investing in US Agriculture: Navigating the New Normal,” May 2024. management — knowing how much inventory to keep and 4. Utility Dive, “US electricity prices rise again as AI, onshoring may when to reorder — can make a significant difference in mean decades of power demand growth: BofA,” July 8, 2024. cash flow and profits. 5. Euromonitor International, “Commodity Market Outlook Q2 2024: Pressures Have Eased But Geopolitical Flareups Drive Market Food and beverage manufacturers can take traditional Volatility,” May 30, 2024. 6. Cision, “US Housing and Lumber Prices Update – July 2024,” July measures such as futures contracts to help ensure a 19, 2024. steady supply of raw materials at a reasonable cost. 7. HUB’s Outlook Executive Survey polled 900 C-Suite and VP-level executives on the issues facing them on profitability, employee vitality and organizational resilience. 3