In the face of conflicts, rising input costs, and evolving political and macroeconomic factors, the U.S. farm economy remained resilient in 2026, while other major ag economies like Brazil grappled with starker economic realities. However, underneath the resiliency in the U.S., a number of warning signs are piling up that will shape the ag industry in 2027.
Despite projected 2026 net cash farm income reaching the second-highest level on record, the headline figure obscures weakness in the market, including a decline in market income and growing dependence on government payments, Wesley Davis, partner and chief ag economist at Meridian Agribusiness Advisors, argues.
Net cash farm incomes are expected to reach $176.4 billion, but market incomes have dropped roughly 34% since the peak in 2022 and $47.4 billion is coming from federal payments, Davis shared in a report he authored titled, “The Mysterious Farm Economy.”
While large row crop, poultry, dairy, and beef producers are “doing pretty good,” other U.S. crop growers are seeing declines in exports, Davis said. For instance, U.S. cotton and rice “had pretty significant wind downs of their export opportunities,” while specialty crops such as apples, grapes, potatoes and hops are oversupplied and have seen declining exports, he added.
Elsewhere, Brazilian farmers face credit availability concerns, high interest rates, and a high number of farm bankruptcies, Davis said. Brazilian farmers filed 448 bankruptcy requests in the second quarter of 2026, down from the 474 requests in the first quarter of the year, according to Serasa Experian data.
“Earlier in the year, I said our check engine light is on for sure, and now our check engine light is still on. In some sub segments of the market, there’s also an annoying beeping sound going on, and the lights [are] flashing a little faster. Our engine hasn’t stalled by any stretch of the imagination, but we certainly are seeing some indicators go off that would give us pause,” Davis elaborated.
He added, “Brazil continues to have headwinds, even though they are winning some of the export markets globally. In the U.S., it’s really a mixed bag and depends on where you are, how big you are, and where you’re focused.”
What a Democrat win in the 2026 midterms would mean for ag policy
U.S. midterm elections will be held on Nov. 3, and polling and betting market data suggest Democrats are likely to take control of the House of Representatives and have a chance of taking the Senate, potentially changing the direction of ag and trade policy, Davis said.
A change in the legislative branch could mean that a revamped farm bill gets rolled into another piece of legislation, and that “we won’t hit that December 31 cliff that happens with some of the programs, particularly dairy price support,” he noted.
“If you believe the poll data, and we do have a blue legislative branch, you might start to see some walk back on tariffs and trade issues that we’ve had historically. And as an economist, I would say that’s beneficial to U.S. ag because we still are extremely competitive in the global market,” Davis elaborated.
He added, “Historically, Democrats have used more sustainability and conservation-linked ways of supporting ag versus Republicans are typically more oriented towards biofuel as a demand sink and ad-hoc payments linked to commodity output.”
Rising raw materials costs show up in higher price finished products
Just like consumers, agribusinesses are grappling with inflation, which is driving up the price of their inputs, leading to higher prices of fertilizer, machines, and more. For instance, the price of rolled steel — the largest input into tractors — has increased 43.29% since January 2020, according to the Producer Price Index.
At the same time, what it costs to hire employees has gone up, applying pressure to profits, and ag suppliers are passing these expenses on to consumers, Davis noted. “If they were price gouging, their margin levels would actually be a lot higher than they were pre-COVID,” he added.
“If you think about what these agribusinesses and input companies, they also face inflation as well in their labor force. You think about the fully loaded cost for a worker has gone up roughly 20 to 25% in the U.S. since January 2020 for some companies. If you think about from farm all the way to table, that represents about 50% of the total cost of food,” Davis said.
How ag economics are impacting tech adoption
When it comes to improving farming operations through tech investments and biological adoption, farmers are split between the “yield and ROI maximizers,” and those growers who are more cost-conscious and more risk-averse, Davis said.
While there has been some movement between the two camps in the past, fewer of the cost-conscious growers are willing to try newer technologies or inputs, he said. However, farmers are using AI as a thought partner in their farming operations, which can change how they access agronomic advice, Davis noted.
“There could potentially be an erosion of farmers relying on retailers and technical agronomists and technical sales support to get that information because now they can get it at least initially from an AI,” he added.
