For the first time in several years, the heavy cloud of skyrocketing production costs is beginning to lift, according to USDA chief economist Justin Benavidez. Speaking at USDA’s 102nd annual Agricultural Outlook Forum on Thursday, Benavidez unveiled a 2026 forecast that suggests “progress is being made,” even as the row-crop sector navigates a significant transition in acreage and a shifting policy landscape.
After his outlook, Farm Journal had the chance to speak one-on-one with the new USDA chief economist. When asked his biggest takeaway from the outlook on the ag economy, he was positive about progress.
“I think the big story for this year is that progress is being made,” Benavidez says. “Obviously, we are not out of the woods in terms of cost of production, in terms of finding higher prices through new sources of demand, but we are making progress.”
Costs: Finally Turning a Modest Corner?
After multiple years of relentless increases, USDA now forecasts production expenses to moderate. Benavidez points to a key inflection point: inflation-adjusted costs.
“We’ll see cost of production moderate for the first time in several years,” he says. “When adjusted for inflation, total cost of production will decline marginally.”
That doesn’t mean every farmer will see lower costs in 2026.
“Certain producers are obviously going to see that nominal cost still go up marginally, in the neighborhood of 1% on average,” he adds.
Behind the recent volatility, Benavidez says, lies a longer-term structural issue.
“We are still working very hard to get out of what is really a 15-year discrepancy in that cost of production and price received for crops,” he says. “We’ve had some black swan events that have masked a long-term gap in cost of production and price received.”
Closing that gap will require more than cost control. Benavidez says it will require more sources of demand.
The Biggest Wild Cards
If there is one factor that could significantly alter the 2026 outlook, Benavidez says it is biofuels policy.
“I’m going to be watching closely to see what happens with the RFS debate as well as [the] 45Z rule,” he says.
The 45Z Clean Fuel Production Credit provides tax incentives to refiners, increasing derived demand for feedstocks such as corn, soybeans and potentially canola. USDA is working on flexible feedstock provisions that could further influence farm-level incentives.
“It provides a tax credit to refiners of those biofuels, and then that increases a derived demand for some of the biofuel input products, like corn, beans and canola,” he explains.
At the same time, negotiations around the Renewable Fuel Standard (RFS) and E15 could reshape demand expectations.
“That could really impact both the demand for corn and for beans, depending on where the RFS and that debate over E15 winds up going,” Benavidez says.
However, he notes the timing of these policies is critical, which is why he considers them the biggest wild cards he’s watching.
“If those changes and updates happen prior to planting, we could see a significant change in what the acreage forecast looks like, as well as what the price forecast looks like.”
The ripple effects could extend beyond Washington.
“We know that in some places where you might swap into planting soybeans, you’re more favorable toward cotton,” he says. “We might see that if one of the policies on the biofuels side goes into place that favors soybeans a little bit more, we might see a reduction in cotton acres — or the opposite could be the case for corn.”
The Numbers You Need to Know
According to Pro Farmer, the highlights from USDA’s Grains and Oilseeds outlook released on Thursday include:
- Corn yield is projected at 183 bu. per acre, producing a 15.8 billion bushel corn crop, down about 7% from 2025. USDA says the yield projection “assumes normal planting progress and summer growing season weather.”
- Total corn supplies are forecast at 17.9 billion bushels, down from the record of 18.6 billion in 2025/26.
- Total U.S. corn use for 2026-27 is forecast to decline about 2% on lower domestic use and exports.
- Food, seed and industrial is flat at 7.0 billion bushels.
- Corn used for ethanol is forecast at 5.6 billion bushels, based on expectations of essentially unchanged motor gasoline consumption and exports.
- Feed and residual use is down about 3% to 6.0 billion bushels on lower supplies.
- Exports are down 200 million bushels to 3.1 billion. “U.S. global trade share is expected to decline slightly on larger competitor exports from South America and modest global demand growth,” USDA says.
- Ending stocks are projected at 1.8 billion bushels, down 290 million from a year ago and resulting in stocks relative to use at 11.4%, down from 2025-26 but higher than the most recent 5-year average of about 10.8%.
- The season-average corn price received by producers is forecast up 10¢ to $4.20 per bushel.
Soybeans and Stronger Profit Potential?
USDA says the projected rise in soybean acres reflects “stronger profitability compared to other crops, along with expected crop rotations across the Corn Belt and the Delta.”
- Assuming normal weather conditions, yields are expected to average 53.0 bu. per acre, leading to a 188-million-bushel increase to production to 4.45 billion bushels.
- U.S. soybean crush is projected to rise by 85 million bushels, reaching 2.655 billion, supported by rising soybean meal and oil demand.
- Given normal weather, oilseed meal supplies are expected to be ample in 2026-27, keeping soybean meal prices relatively flat with the prior marketing year at $300 per short ton.
- U.S. soybean exports for 2026-27 are projected at 1.7 billion bushels, a recovery from the 2025-26 forecast of 1.58 billion bushels (or 42.9 million tons).
- Exports for the 2025-26 marketing year are forecast to decline to the lowest level in 13 years. Accounting for a record-low share of just 23% of global soybean trade, USDA says tariff measures curtailed shipments to China, the largest export destination for the U.S., which imported an average 28.7 million metric tons of U.S. soybeans during the 2021-22 through 2023-24 marketing years. Argentina’s temporary elimination of export taxes last September also led to a counter-seasonal surge in exports in November, further impacting U.S. market share globally, USDA adds.
- Soybean ending stocks for 2026-27 are projected at 355 million bushels, nearly flat with the 2025-26 forecast.
- The season-average farm price is projected at $10.30 per bushel, marginally higher than the prior marketing year.
Benavidez says USDA’s price forecast is for marginal improvements, but he notes headwinds are still in the forecast.
Acreage Shifts: Fewer Corn Acres, More Soybeans
One of the more closely watched projections from USDA is a 5 million acre decline in corn plantings and an increase in soybean acreage to 85 million. The corn reduction is roughly 1 million acres larger than some private trade forecasts.
“There’s always discrepancy in forecasts, right?” Benavidez says, noting the projections are early-season estimates.
He says it’s important to note USDA’s World Agricultural Outlook Board evaluates multiple variables when looking at acreage forecasts this early.
“They’re looking into factors, obviously the soy-to-corn price ratio, which is trending toward more bean acres relative to previous years,” he explains. “We’re getting close back to that 10-year average of the ratio between soy and corn price, which trends toward a little bit more bean acreage this year when compared to corn.”
Global and domestic stocks also play into the equation. Ultimately, he says it boils down to where producers think they will make the highest net return.
Total principal crop acres are forecast to decline about 1.5 million acres. However, shifts among crops could offset some of that.
“Our principal crops will see about a 1.5 million acre decline in terms of total acres planted,” Benavidez says. “But the mix of other acres is going to moderate some of that acreage decline a little bit.”
He pointed to cotton as one example, but he notes regional impacts are harder to pin down at this stage.
“It will vary across the country,” he says. “But regional specifics — I think this is very early to be talking about regional specifics.”
Cotton: Sustained Headwinds
Among the major crops, cotton faces some of the most persistent structural challenges.
“You know, we do look at the cotton complex as something that is facing sustained headwinds,” Benavidez says.
He acknowledges recent gains in net cash farm income for cotton producers, attributing part of that improvement to policy support. But globally, competition remains intense.
“There’s a lot of increased production in Brazil that is competing with our exports from the United States,” he says. “They have, in some cases, a lower cost of production than our producers here in the United States.”
Long-term consumption trends also weigh on the sector, as he notes the long-term trend toward more synthetic fiber and flat demand for cotton fibers is a headwind the cotton industry is going to face long term.
“The cotton complex is one that I certainly do think that I’ll pay a lot of attention to this year,” he says.
Trade: A Global Balance Sheet Approach
USDA’s outlook also includes China’s commitment to purchase 25 million metric tons of U.S. soybeans annually through 2028. But Benavidez emphasizes USDA does not model trade strategy; it models global supply and demand.
“As an economist, we don’t really focus on what the strategy is in terms of making those decisions,” he says.
Instead, the World Agricultural Outlook Board looks at total global demand and total global supply.
“If China or any other partner has demand for a certain amount of bean imports, that’s going to offset any readjustment in trade with other partners throughout the globe,” he explains. “We balance that with global supply and build a market picture based on those two factors.”
Fewer Headwinds — But Not Clear Skies
The overarching theme of Benavidez’s 2026 outlook is cautious optimism.
“We are not out of the woods, but we are making progress,” he says.
With moderating costs, modest price gains and potential demand expansion through biofuels, the farm economy may finally be seeing some easing pressure. Yet structural imbalances, global competition and policy uncertainty remain central forces shaping the year ahead.