Farm Income Revised Higher, But Ag Economy Remains Challenging

The USDA says U.S. farm income is expected to decline in 2026, despite a stronger outlook for some crops. The agency’s September forecast puts net farm income at $158.4 billion, down 2.6% from the newly revised 2025 estimate. When adjusted for inflation, the decline is 5.5%.

"Primary" Crops Showed Big Gains From February

The forecast shows a much stronger 2026 outlook for crop receipts than the February projection. Total crop cash receipts are now projected at $253 billion, up $14.6 billion, or 6.1%, from 2025 and more than $12 billion above USDA’s February forecast of $240.8 billion. After adjusting for inflation, crop receipts are still expected to increase 3.1%.

The Farm Bureau noted the largest revisions are concentrated in several major crops. Corn receipts are now expected to increase $6.8 billion, or 11.3%, to $67.3 billion, largely because of higher quantities sold; in February, USDA projected an increase of just $2 billion, or 3.3%. Soybean receipts are forecast to rise $4.3 billion, or 10%, to $47.9 billion, primarily on higher prices, compared with essentially no growth projected in February. Cotton receipts are now forecast to increase $651 million, or 12.5%, to $5.9 billion, after USDA previously expected receipts to remain near 2025 levels.

Other crops moved in the opposite direction. Rice receipts are projected to fall $571 million, or 19.6%, to $2.3 billion, a steeper decline than the 12.5% drop forecast in February. Hay receipts are now expected to increase only $104 million, or 1.3%, to $8 billion, compared with a $400 million, or 5.5%, increase projected earlier in the year, as persistent drought conditions have reduced forage and hay supplies across many livestock-producing regions.

Specialty Crops Mixed

Specialty crop receipts are also mixed. Vegetable and melon receipts are projected to increase $3.8 billion, or 15%, to $28.8 billion, a substantial upward revision from the 2.7% increase USDA projected in February. Fruit and nut receipts, however, are now expected to decline slightly, down about $140 million, or 0.4%, to $34.7 billion, reversing February’s forecast for a 1.2% increase.

Taken together, USDA’s September update points to stronger revenue expectations across much of the crop sector than earlier in the year, particularly for corn, soybeans, cotton and vegetables. But the gains remain uneven, and higher receipts come alongside sharply higher expectations for fertilizer, fuel and other production costs, limiting the extent to which stronger sales translate into improved farm margins.

Livestock Also Improved

USDA’s September forecast also revised the livestock outlook higher than the February estimate, though receipts are still expected to retreat from a very strong 2025. Animal and animal product cash receipts are projected at $287.3 billion in 2026, about $13.4 billion above USDA’s February forecast, but down $16.4 billion, or 5.4%, from 2025. After adjusting for inflation, receipts are expected to decline 8.1%.

Farm Bureau pointed out cattle and calves remain the strongest part of the sector, with receipts forecast to rise $7 billion, or 5.2%, to $140.7 billion. However, higher receipts largely reflect historically tight cattle supplies rather than expanding production. Today’s strong cattle prices are a supply story years in the making, with the U.S. beef cow herd near historic lows following years of drought-driven liquidation and elevated production costs.

Input Costs remain High

Production costs are one of the most significant changes in USDA’s September outlook. Total farm production expenses are now forecast at $492.8 billion in 2026, up $21.2 billion, or 4.5%, from 2025 and $15.1 billion above USDA’s February forecast. After adjusting for inflation, expenses are now expected to rise 1.5%; in February, USDA projected a 0.9% decline.

Several major categories are moving higher. Livestock and poultry purchases are projected to increase $7.4 billion, or 11.4%, to $71.9 billion, while fertilizer, lime and soil conditioner expenses rise $5.3 billion, or 15.3%, to $39.6 billion and fuel and oil costs increase $4.8 billion, or 28.8%, to $21.6 billion. Marketing, storage and transportation expenses are forecast to increase about $1.3 billion, or 12%, property taxes and fees by about $867 million, or 4.8%, and interest expenses by roughly $921 million, or 2.8%. Cash labor costs remain near $44.3 billion, down slightly from 2025, while feed expenses decline 2.1%.

The sharp increases now projected for fuel and fertilizer are particularly important given renewed conflict in the Middle East. Fighting involving Iran has again disrupted traffic through the Strait of Hormuz and pushed Brent crude above $96 per barrel, increasing the risk of further pressure on energy, transportation and fertilizer costs.

Taken together, USDA’s updated estimates suggest that meaningful expense relief remains limited. Even where individual costs ease, total production expenses remain elevated, leaving farm margins vulnerable to weaker commodity prices and renewed input-cost shocks.

Importantly, the forecast may not fully capture the sharp decline in cattle prices that occurred following the administration’s recent proclamation to import 660 million pounds of beef. Cattle farmers and ranchers in many regions have seen cattle values fall, creating losses that could weigh on actual farm revenues beyond what is reflected in USDA’s current outlook.

Milk receipts are still expected to decline, but by a smaller amount than previously forecast, falling $2.1 billion, or 4.3%, to $46.8 billion, versus a 12.8% decline projected in February. Hog receipts are now expected to fall $1.2 billion, or 4%, compared with just a 0.7% decline in February.

Federal farm support is also projected to jump nearly 70% to $47 billion. And farm debt is expected to reach a record $605 billion in 2026.

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