While economists see some reasons for optimism in agriculture, the latest Farm Journal Ag Economists’ Monthly Monitor shows growing concern about farm profitability, borrowing costs, input costs and the broader financial outlook heading into the second half of 2026.
Farm Journal regularly reaches out to a vetted list of 80 ag economists from across the industry. Providing directional insights, 17 economists responded to the May survey:
- Higher interest rates remain a major concern, with economists expecting reduced capital investment and greater financial stress for highly leveraged producers.
- Input costs, exports, land values, water availability and farm loan demand are among the top indicators economists are monitoring.
- The majority are skeptical that year-round E15 legislation will pass this year, with 60% saying it is either unlikely or highly unlikely.
40% Say Current Economics Require Significant Changes
One of the survey’s most striking findings centers on the sustainability of current farming operations.
Asked how producers will respond if today’s crop prices and input costs persist, 40% of economists said many farms will require significant restructuring to remain viable. Just 33% believe producers can largely maintain their current operational structures under existing conditions.
The results compare to Farm Journal’s recent Farmer and Rancher Sentiment Survey that found 43% of farmers describe their farm’s financial condition as “good.”
The economists’ response reflects growing concern that current margins simply do not work long term for many crop producers. Several respondents pointed to tightening working capital, weaker commodity prices and mounting financial pressures as signs that agriculture is entering a more challenging phase of the farm economy.
One economist noted: “With recent tight financial conditions in the farm sector, it will take a tangible positive improvement in farm finances to see much investment in agricultural capital purchases.”
Another warned current conditions might only be the beginning: “I feel like we will start seeing things shift to very bad in two years if we do not see an up year quickly.”
Interest Rates Creating a Potential Breaking Point
That concern becomes even heightened when economists look at borrowing costs. With another interest rate hike expected before year-end, more than half of respondents identified reduced capital investment as one of the most significant consequences for agriculture. An equal percentage warned that higher debt-servicing costs could create a “breaking point” for young, beginning and highly leveraged operations.
While economists do not expect widespread farm failures, they believe rising borrowing costs will increasingly separate financially strong operations from those already under stress.
“The system can continue to function if farmers are well capitalized,” one economist wrote. “Many are profitable but may not have the cash on hand to operate without the loans. If access to cash were to pull back, it would be highly detrimental for farmers.”
The survey suggests lenders, producers and policymakers alike will be closely watching credit conditions throughout the remainder of the year.
E15 Outlook Remains Clouded
Despite strong support from ethanol groups and many agricultural organizations, economists remain unconvinced Congress will deliver permanent year-round E15 sales anytime soon. Yet, in the Farmer and Rancher Sentiment survey that gauged views ahead of the midterms, year-round E15 approval is a decisive voting factor for nearly half of all producers.
- Nearly 47% of respondents said passage is unlikely during the current legislative session.
- Another 13% called it highly unlikely.
- Just 27% believe passage is likely.
The results highlight ongoing uncertainty surrounding one of agriculture’s most discussed policy priorities and suggest economists see substantial political hurdles remaining despite bipartisan support, despite strong support from ethanol groups and farm organizations.
What Economists Are Watching
When asked what indicator they are monitoring most closely right now, responses varied widely, underscoring the complexity of today’s farm economy.
Economists cited:
- Commodity prices
- Export demand
- Fertilizer costs
- Diesel prices
- Land values and cash rents
- Agricultural loan demand
- Net farm income
- General inflation
One economist from the Rocky Mountain region pointed to water availability as the biggest concern.
“Many irrigation systems are delivering only about 40% to 50% of normal water for irrigation. Some producers will see it as an easier path to sell to developers, furthering the loss of agricultural acres.”
The Outlook for 2026: Room for Optimism
The May Ag Economists’ Monthly Monitor paints a picture of cautious optimism mixed with growing concern. Economists see some support from trade opportunities and potential policy developments, but the dominant theme throughout the survey is concern about profitability this year.
One area where some economists see opportunity is in the global cost environment. While U.S. farmers continue to grapple with higher fertilizer and borrowing costs, University of Missouri Extension agricultural economist Ben Brown believes some of America’s biggest competitors may be facing even greater financial pressure.
Brown points to Brazil, where producers rely heavily on imported fertilizer and face significantly higher interest rates than U.S. farmers. He says those higher borrowing costs magnify the impact of rising input prices, creating a substantial financing burden for South American producers.
“All of those things contribute to an environment where I think we could see lower production coming out of South America,” Brown says. “That leads to opportunities for us to trade our product in the global market because it’s going to open up opportunities to ship product to countries that Brazil maybe would have supplied.”
Brown notes that while U.S. producers are feeling pressure from higher interest rates, Brazil’s rates are even higher. When elevated borrowing costs are layered on top of expensive fertilizer purchases, the result could be reduced crop production and slower acreage expansion in South America.
That, in turn, could create opportunities for U.S. corn and soybean exports while providing support for commodity prices.
Brown believes the market could begin recognizing those production risks later this year, potentially supporting prices by late 2026, with more noticeable impacts emerging in 2027.
“We could start to see the market respond with a little higher prices at the back end of 2026,” Brown says. “By the time the calendar turns to 2027, those might be some good opportunities to move old crop grain and oilseeds.”
Still, the survey’s dominant message remains one of caution. Many economists believe producers can weather the current downturn for now. The bigger question is whether margins improve before working capital, borrowing costs and financial pressures force more farms to make significant operational changes.
For now, economists appear to be watching the same variables as producers: input costs, interest rates, exports and commodity prices, hoping that stronger export demand and potential production challenges abroad can help offset mounting financial pressures at home.