The good folks over at CoBank recently released their “2026: The Year Ahead” outlook, which examines several key factors that will shape agriculture and market sectors that serve rural communities. Uncertainty surrounding US trade policy is lower than it was a year ago, which brings added stability to the broader outlook for 2026. However, CoBank CEO Thomas Halverson remains concerned about a couple of macro trends in rural America right now, particularly the downturn in the crop sector, and whether that downturn is structural or cyclical. Below are some of the highlights from CoBank’s 2026 outlook, which is available HERE.
U.S. Government Policy: The environment in Washington is beginning to change, if ever so slightly. The one-sided nature of the November election results likely served to refocus many elected officials on their own political fortunes. While there is potential for Congressional agreement on the remaining appropriation bills by January, bipartisan cooperation will become less likely as the 2026 mid-term elections approach. Farm Bill programs have been extended through September, but pressure is growing for Congress to take further action before the election. Questions surrounding the president’s authority on tariffs, a key issue impacting several market sectors and businesses, will again dominate policy discussions in the coming year. The farm economy, particularly on the row crop front, will also get a constant focus. Continued low prices on commodities, large crops, curtailed export volume and elevated input costs add up to pain in farm country. While President Trump announced $12 billion to farmers through the Farmer Bridge Assistance Program with payments starting Feb. 28, 2026, many in the industry are calling the funding insufficient to fully address farmers’ pain. In an election year, there will be pressure on both the administration and Congress to provide much-needed certainty in the marketplace.
Grains and Oilseeds: Global grain and oilseed markets remain oversupplied, but increased biofuels production and improving export conditions are boosting optimism that prices have passed their cyclical bottoms. For oilseeds, a record soybean harvest in Brazil—paired with record oilseed production in countries like Kazakhstan that enjoy proximity to China—will erode U.S. soybean export competitiveness into China in 2026. World grain supplies are also ample with enlarged harvests in virtually every major exporting country for corn and wheat, which will compete with U.S. exports. Hope remains that China will start buying U.S. sorghum again, which would provide much-needed support to feed grain prices. At the same time, demand for U.S. grains and oilseeds will continue strengthening as low prices do the arduous work of stimulating usage. Rising biofuel demand around the world further strengthens the demand story for grains and oilseeds. In the U.S., policy resolution on EPA’s renewable volume obligation and small refinery exemptions should bring greater clarity on blending rates, particularly for biomass-based diesel, where EPA proposed significantly greater blending rates. Livestock end users will benefit from low feed costs through 2026 which will incentivize feed usage. But grain farmers will face hard choices for planting this spring. Prevailing prices of nearly all crops are below the cost of production. Current price ratios indicate soybeans stand to pull acres from all major crops in 2026. High input costs may discourage farmers from planting corn and switch to cheaper alternatives. Farmer affordability remains under pressure, and while corn prices have slid, fertilizer prices have not.
Animal Protein: Despite rising price points for meat and poultry, animal protein demand should remain strong in 2026. The combination of higher revenues and falling feed prices is boosting producer optimism for the year ahead, but not to the degree that expansion is expected to proliferate. Livestock supply conditions have grown notably tighter in the last two years and are likely to remain so over the next 12 to 18 months. As a result, feeding efficiencies and heavier carcasses will remain a focal point in 2026. While optimism in the sector is strong, several headwinds, including new and recurring livestock diseases and trade disruptions, could constrain growth in the coming year. Historically, when corn prices are high, livestock meat production pulls back. However, as commodity crop prices fall, animals will stay on feed longer or have access to higher-quality feedstuffs to gain more weight per pound of feed. For 2026, USDA forecasts poultry production will grow by 2.1% year-over-year, the largest change since 2019. As cattle availability declines next year, beef output is forecast down 4.7%, further dampening red meat production. Finally, labor remains a challenge both on farm and in processing facilities, which is accelerating investment in technology and equipment.
Dairy: Milk protein is poised for an extended bull-market run as demand for protein-based dairy products continues to climb. While demand for full-fat dairy products also remains strong, butterfat has moved to an oversupply situation. Dairy processors are awash in butterfat with some putting caps on butterfat payments. However, there’s no such discussion about protein caps. In fact, protein markets are as strong as ever and could remain so for many years to come. Protein ranks as one of the must-have macronutrients among domestic and international consumers. In addition, 23% of U.S. households are now using GLP-1 weight loss medications, and those consumers have a stronger appetite for high-protein foods to help maintain healthy muscle mass. And according to data from Circana and Dairy Management Inc., four of the top 10 protein products for absolute unit sales growth in the past 52 weeks were dairy products, including cheese, cottage cheese and yogurt. CoBank also says the beef-on-dairy movement also shows no signs of slowing over the next three-year horizon. While there will be ebbs and flows in daily market values, the long-term trajectory indicates that the beef heifer and cow numbers are not close to entering a substantial rebuilding phase.
Tom Halverson’s Note: The full report is pretty long but be sure to read CoBank CEO Tom Halverson’s note to customers and other stakeholders, which you can read in its entirety HERE. One trend he is focused on is the nation’s electricity infrastructure and its ability to handle the significant acceleration of demand growth from data centers and reshoring of manufacturing. Additionally, Halverson worries that the downturn in the crop sector could be structural rather than cyclical, for the following reasons:
- The long-term demand destruction for ag exports that we’ve seen in China and other foreign markets due to tariffs and other policy headwinds.
- The rise of Brazil as a peer competitor for grain production, particularly soybeans and corn.
- The lack of clear new sources of future demand growth for these U.S. crops either domestically or internationally; and
- Continuing budget deficits will make it increasingly difficult for the federal government to support American farmers with assistance.
