WASHINGTON, D.C. (RFD NEWS) — The latest farm income forecast from the U.S. Department of Agriculture (USDA) is pointing to another challenging year for much of the agricultural economy, with inflation-adjusted net farm income expected to decline by $9.1 billion in 2026.
The latest forecast reflects changes to USDA’s outlook for both farm income and production expenses, with higher costs continuing to pressure producers across the country.
American Farm Bureau Federation (AFBF) economist Dr. Faith Parum joined us on Thursday’s Market Day Report to discuss the outlook, which she said looks weaker in part because USDA raised its estimate for 2025 farm income.
Higher 2025 Income Changes 2026 Comparison
USDA updates its farm income forecast three times a year, adjusting its projections as market conditions change.
Parum says the department’s higher estimate for 2025 farm income makes the projected decline in 2026 appear more significant, particularly after adjusting for inflation.
At the same time, USDA revised its projection for production expenses higher for 2026.
Producers were already facing historically high costs in the previous forecast, making the continued increase in expenses a significant concern.
Livestock Gains Offset by Higher Costs
The livestock sector is one area where producers are seeing stronger returns.
Parum says cattle receipts are expected to increase about 5% in 2026, supported by historically low cattle inventories and strong cattle prices.
However, higher fertilizer, fuel, oil, and other production costs are taking away from those gains.
Input costs remain a major challenge across agriculture, regardless of what farmers and ranchers produce.
Know the Break-Even Point
For producers navigating difficult economic conditions, Parum recommends starting with the basics: knowing the farm’s budget and break-even costs.
She says farmers should evaluate whether each input is necessary rather than automatically continuing practices simply because they have always been used.
That includes fertilizer, pesticides, herbicides and other production expenses.
Building a trusted team can also help producers make those decisions. Parum recommends working closely with agronomists, Extension agents and lenders who understand the operation and can help evaluate financial and production decisions.
Crop insurance and other risk-management tools can also play an important role in protecting farm income.
Changes included in the One Big Beautiful Bill could provide additional support through higher safety-net reference prices under programs such as Agriculture Risk Coverage and Price Loss Coverage.
Farm Bill Remains a Priority
Parum says policymakers can also provide greater certainty by passing a five-year Farm Bill.
She says a modernized Farm Bill would bring greater stability to farmers and ranchers as they plan for the future while making assistance more timely and predictable.
Lawmakers could also address production costs, including efforts related to fertilizer pricing transparency.
Expanding market opportunities is another way policymakers can support producers.
Parum pointed to year-round E15 availability, higher renewable fuel standards and expanded trade opportunities as potential ways to increase demand for American agricultural products.
For producers facing another year of economic pressure, the combination of cost management, risk protection and stronger market opportunities could be critical to maintaining financial stability.
