What is the status of the general ag economy? On the surface, strong livestock prices and recent government payments are making the farm sector look more positive than reality. Here are four drivers of farm profitability to watch this year and a glimpse into 2026.
There’s More Than Meets The Eye
As highlighted by Farmer Mac, an aggregate view of the agricultural economy doesn’t give a clear view of the driving forces and notably, the unknowns surrounding trade policy.
Farmer Mac highlights how the strength of the U.S. dollar might be the largest driver of commodity price movements over the past several months. A stronger dollar can make U.S. commodities more expensive on the global market, whereas a weaker dollar can lead to higher domestic prices.
Input Costs Vs. Commodity Prices
“The grain complex is under a lot of pressure,” says John Newton with Terrain Ag. “USDA just released their new cost of production estimates for 2026. We’re looking at record input costs for a number of crops. And commodity prices aren’t showing any signs of really rebounding.”
Per USDA, per-acre cost of production for corn in 2026 is forecast to be $915.51 — up from $897.44 in 2025. For soybeans, cost of production per acre is forecast to be $650.34 — compared with $639.15 in 2025.
Newton says the $30 billion in ad hoc payments to farmers approved by Congress is helping farmer sentiment and the ag economy’s health.
“Looking to the next year, that ad hoc support is not guaranteed to be there. Hopefully there’s more ‘farm’ in the farm bill because that’s also retroactive to the 2025 crop year. But again, input costs are projected to increase. Every single category is projected to be higher next year than this year. The only category projected to be lower is interest expenses,” he says. “Looking forward to 2026, it’s going to be a tight margin environment unless we get some strong tailwinds in agriculture.”
For livestock producers, the lower commodity prices have continued to bring lower feed costs. Specifically for swine feed costs, 2024 ticked downward, with lower costs expected through the rest of the year.
Interest Rates and Farmer Credit Health
“It’s a cash flow situation in the ag sector. That’s why they’re holding off on any large expenditures if they can. That’s the name of the game, which is why Congress has to approve a farm safety net. If they don’t, we’re in a world of hurt in the ag sector,” says Jim Wiesemeyer, a Washington policy analyst.
Earlier this week, the Fed left interest rates unchanged.
“I think the Fed is locked in, and it could be September at the earliest, if not October, before they actually have the data they want to begin cutting interest rates,” Wiesemeyer says.
Newton agrees.
“They’re waiting for inflation to heat up. They’re waiting for if unemployment is going to heat up. We continue to beat expectations on all of those,” Newton says. “We had negative GDP growth the first quarter. If that continues — if unemployment ticks up, if inflation ticks up, that’s what they’re watching for.”
Meanwhile, using data from the first quarter, the KC Fed released a report showing deteriorating ag credit conditions. Ty Kreitman and Morgan Mastrianni point to data showing how demand for farm loans continued to grow as farm finances tightened, but credit availability was steady. From their report, more lenders say they had tighter credit standards — the highest in over a decade.
USDA’s Next Net Cash Farm Income Report
In September, USDA will release its update on Net Cash Farm Income (NCFI).
“A knee-jerk reaction might be that USDA is likely to reduce its forecast for NCFI in September,” said a Farmer Mac report. “The reality is numerous factors influence farm sector revenues and profits.”
