The American labor market is reaching a critical turning point that could tighten labor availability in rural industries and slow growth across the U.S. economy. A new quarterly report from CoBank’s Knowledge Exchange warns that demographic shifts and recent policy changes may start impacting businesses as soon as late 2025.
From livestock and crop operations to food processors and rural cooperatives, this labor shortage is becoming especially noticeable in the heart of America’s farmland. Many producers are already struggling to fill roles, and the challenge is expected to intensify in the coming months.
“Barring an unforeseen change in labor force participation rates or immigration policies, the pool of available workers is set to shrink sharply in the next few years,” says Rob Fox, director of CoBank’s Knowledge Exchange. “The problem will be even more serious in states with slower population growth in the Upper Midwest, Corn Belt and Central Plains.”
Demographic Pressures Mount
Fox says the warning signs have been building for years. Labor force participation has steadily declined, birth rates have dropped and immigration policy has become more restrictive.
Between 2022 and 2024, nearly 9 million immigrants arrived in the U.S., driven by global humanitarian crises and relaxed federal rules. While that influx temporarily eased labor constraints, Fox says it only masked deeper, long-term trends.
U.S. fertility rates have fallen from 2.12 children per woman in 2007 to 1.62 in 2023, meaning fewer young people are entering the workforce just as the last of the baby boomers retire. In addition, labor force participation has slipped from a peak of 67% in 2000 to 62% today. Nearly 2.5 million working-age Americans have left the labor force in the past eight months alone.
“There is no single reason people are stepping away,” Fox explains. “It’s a combination of rising caregiving responsibilities, job skill mismatches, mental health challenges and higher disability rates. These are complex issues that won’t be resolved overnight.”
Shrinking Workforce Hits Agriculture Hard
The effects are already being felt across rural America. Farms, food processors, equipment dealers and cooperatives are struggling to find and keep the workers they need to maintain daily operations. Seasonal labor has become harder to find and full-time positions, especially those requiring specialized skills or long hours, are increasingly difficult to fill.
In regions with slower population growth, such as the upper Midwest and central Plains, the challenge is even more acute. These areas often lack the population inflows that help offset workforce losses elsewhere in the country.
While labor has been tight for several years, Fox warns that conditions are poised to deteriorate further.
“What we are facing is not just a cyclical labor issue; it’s a structural one,” he says.
Border encounters have dropped sharply since August 2024, signaling a steep decline in immigration. Combined with rising political pressure to increase deportations, the agricultural labor pool could shrink even more in the months ahead.
“Immigration has long been a key pillar supporting the rural workforce,” Fox notes. “Without a steady flow of new workers, farms and agribusinesses will have to get creative, either by increasing wages, automating tasks or changing how they manage production.”
Technology Offers a Path Forward
In response, more agricultural businesses are turning to technology to help offset the labor gap.
“The key to addressing labor scarcity always lies in innovation,” Fox says. “AI and robotics are no longer limited to the factory floor. They are increasingly being used in fields, dairies and food plants.”
A recent Gallup poll found that nearly one in five workers already uses artificial intelligence in some form each week. At the same time, the cost of robotics has dropped by nearly half in the past decade, making automation more accessible for a broader range of farms and agribusinesses.
CoBank’s report notes that many farm supply customers are using new tools to increase efficiency, improve decision-making and free up time for employees to focus on higher-value responsibilities.
Planning for What Comes Next
As producers look toward 2026, a combination of labor constraints, volatile input costs and shifting policy landscapes will continue to shape decision-making. Fox thinks adaptability will be essential.
“Technology will be critical to agriculture’s future,” he says. “AI and robotics can help farmers do more with fewer workers, boosting efficiency and margins. But investment decisions must be made carefully, especially in this uncertain economic environment.”
Until clearer policies emerge on trade, labor and energy, rural America will need to prepare for continued pressure.
“This is a pivotal moment,” Fox concludes. “Farms that plan ahead, embrace innovation and stay flexible will be best positioned to succeed.”
