Feds say Nebraska GDP shrunk more than 6% in first quarter of 2025, led by ag

by Erin Bamer

Nebraska and Iowa tied for the states with the largest losses of Gross Domestic Product in the first quarter of 2025, of 6.1%, according to a report from the U.S. Bureau of Economic Analysis.

Most remaining states also saw their GDP’s shrink, though by smaller amounts, while a handful saw modest increases. GDP represents the total market value of goods and services produced during a specific time period.

The analysis compared Nebraska’s GDP to what it was one year ago. The report revealed that declines in agriculture played the biggest role in Nebraska and Iowa’s rates.

This is a rare economic output decrease for the U.S. as a whole — the first decrease during the first quarter since 2022, according to Stateline reporter Tim Henderson.

However, Nebraska State Budget Administrator Neil Sullivan said the drop is not as severe as it might appear. He said the percentage is based on projections from the last quarter of 2024. He offered competing numbers claiming Nebraska’s actual GDP difference quarter-over-quarter was down about 1.5%.

John Hansen, president of the Nebraska Farmers Union, said he believes the country is facing the worst farming financial crisis since the 1980s. He helps run a crisis hotline for farmers, and said he’s fielded high-stress calls from people struggling financially.

“There’s desperation in their voices,” Hansen said. “They’re up against the wall.”

Global clashes and trade wars hammered Midwestern states’ agricultural economies this year. Row-crop farmers took a hit, and that accounts for much of Nebraska’s agricultural output, including wheat, corn and soybeans.

Sullivan said prices for these products are the lowest in a decade. But on the flip side, he said the market is also stable, making it safer for farmers to produce. This is primarily because of protections added to the federal budget reconciliation bill, he said.

Ernie Goss, a regional economist and professor at Creighton University, said prices for these top Nebraska products have gone down, while prices of farming resources like fertilizer have not. This has ripple effects, namely that farmers are pushed to cut costs and aren’t spending as much on ag equipment, he said.

On the bright side, livestock prices have remained good, Goss said, which is a relief to Nebraska’s ranchers. He said many of these factors are impacting farmers across the U.S. — it’s just felt deeper in Nebraska because the state is a top ag producer.

“It’s like Michigan having a downturn in the automobile industry,” Goss said.

It’s not just agriculture contributing to Nebraska’s lower GDP, Goss noted. The state’s manufacturing industry has also taken a hit, primarily due to job losses that have been prevalent across the country over the last year.

Brad Lubben, associate professor of agricultural economics at University of Nebraska-Lincoln, said he expected record farm income in Nebraska for 2025, largely because of emergency government assistance that rolled out at the start of the year. However, he noted that uncertainty with federal policies on farming, taxes and trade can detract from production.

“Farm programs and tax policy have since been largely resolved with the recent reconciliation bill, although the impacts start to accrue in 2026,” Lubben said in an email. “The trade outlook however remains quite uncertain and volatile, hurting prospects or at least sentiment looking forward.”

Goss agreed that global trade has slowed. China, a top pork buyer, has slowed its trade with the U.S. due to tariffs, he said as an example. Goss said President Donald Trump seems to think of trade as “a zero sum game,” though in reality he argued that both parties can benefit when it’s done well.

Gov. Jim Pillen sang a different tune in a social media post on Monday, praising Trump for his recent trade deal with the European Union. Among other things, the deal imposes a 15% tariff on European goods in exchange for EU companies buying $750 billion in American energy products over three years.

“POTUS makes trade a priority — and agriculture keeps winning,” Pillen wrote in the post on X.

A 6.1% GDP drop is cause for concern, Goss said. In a good year, he said Nebraska sees GDP growth of between 6-7%, adjusted for inflation. This level of decline could result in additional job losses and cuts to government services, he said.

Sullivan said he does not foresee the need for cuts in Nebraska’s budget due to the GDP drop.

However, Lubben noted that with the state being a top ag producer and the continued strength in the cattle market, he still expects Nebraska to outperform the U.S. ag sector as a whole.

Kenny Zoeller, director of policy research for Pillen’s office, said Nebraska is in a strong fiscal position. Though he acknowledged Trump’s tariffs contributed to the state’s GDP drop, he said he expects that to improve over time.

Hansen said it’s too early to say what the impacts of Trump’s tariffs will be. He was more confident in saying Nebraska consumers will pay higher prices because of them.

Zoeller said Nebraska is in a similar position to 2017, when the state faced a more than $1 billion budget deficit and uncertainty in global trade. He argued that Nebraska has solid financial flexibility and decent reserves that should carry the state through safely.

The Nebraska Examiner is an affiliate of States Newsroom, the nation’s largest state-focused nonprofit news organization, supported by grants and donations. The Examiner retains full editorial independence.