Steadier economy, tough choices for farmers in 2026

Economic uncertainty about U.S. trade policy is much lower than it was a year ago, steadying the broader outlook for 2026, according to “The Year Ahead” report by CoBank’s Knowledge Exchange.

With tariffs fading from the forefront of economic concern somewhat, artificial intelligence (AI) has become the focal point of financial market prognostication. Unprecedented levels of investment are driving fears that the stock market is reaching unsustainable heights, and a significant market correction would lead to a sharp pullback in consumer spending, potentially even causing a recession. 

“That’s one possibility, but it’s not the most likely scenario,” said Rob Fox, vice president of CoBank’s Knowledge Exchange. “Corporate earnings remain extremely strong, and aggregate corporate debt levels are historically low. Most of the stock market gains in the second half of 2025 were attributable to continually improving earnings expectations, not irrational exuberance.”  

Released in mid-December, CoBank’s 2026 outlook report examines several key factors that will shape agriculture and market sectors that serve rural communities throughout the U.S. 

Markets adjust to a new normal

Several indicators suggest the economy will continue to remain steady in 2026. With the year-on-year tariff inflationary effect fading by end of the first quarter, core inflation is likely to resume its downward trend in the second half of the year. That will provide sufficient cover for the Federal Reserve to continue cutting interest rates in 2026. The labor market has cooled from the post-COVID
cycle and is now more in line with historic norms. But near 4% wage growth and sub 5% unemployment are well within the margin of safety for a growing economy in 2026. 

Washington landscape shifts

The environment in Washington is beginning to change, if ever so slightly. The one-sided nature of November elections likely served to refocus many elected officials on their own political fortunes. While there is potential Congressional agreement on the remaining appropriation bills 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.  

Ample grain burdens markets

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. Demand for U.S. grains and oilseeds will continue strengthening as low prices stimulate use. But grain farmers face hard choices for planting this spring. Prevailing prices of nearly all crops are below the cost of production. High input costs may discourage farmers from planting corn in favor of cheaper alternatives.  

Consumers clamor for protein

Despite rising prices for meat, animal protein demand should remain strong in 2026. Higher revenues and falling feed prices are boosting producer optimism, but not enough to encourage expansion. Livestock supplies are notably tighter and will likely remain so over the next 12 to 18 months. Headwinds include new and recurring livestock diseases and trade disruptions, both of which could constrain growth in the year ahead. Demand for high-protein dairy products also continues to climb, and shifting consumer trends suggest protein markets will remain strong for the foreseeable future.  

AI expands into rural America

The rise of AI is fueling a historic surge in data center spending, and companies such as Microsoft and Amazon depend on rural America  for their ambitious buildout plans. Data center operators are moving fast and writing big checks to reduce friction in rural areas. While these communities face tradeoffs, rejecting data center projects could mean missing out on generational economic benefits. 

Read the full report online at HERE.

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