Trends to Watch in 2026, From the Economist’s View

Now that 2026 has arrived, what might lie ahead for agriculture and farmland values?

We caught up with Megan Roberts, an ag economist with Compeer Financial; and Matt Erickson, senior research analyst with Terrain, which works with AgCountry Farm Credit Services, American AgCredit, Farm Credit Services of America and Frontier Farm Credit, to get their perspective.

The last few years have brought a lot of changes, from the presidential administration to the economy. What key factors are shaping the economy as we move into 2026?

Erickson: It’s a complex mix of persistent inflation, shifting monetary policy, and mounting fiscal pressures. Inflation remains above the Federal Reserve’s 2% target and is projected to stay elevated through at least 2028. This creates real challenges for consumer purchasing power and business planning.

While the labor market is softening, political pressure to lower interest rates — driven in part by the administration’s focus on managing federal debt — has introduced tension within the Fed, especially with new leadership expected mid-2026.

A good indicator of the market’s outlook for inflation (the five- and 10-year breakeven inflation rates) remains elevated. This signals that investors expect inflation to stay sticky and that borrowing costs may not ease as quickly as some hope. This has direct implications for everything from mortgage rates to farmland financing.

The cumulative impact of inflation since January 2021 has been severe. Food, gas and shelter costs are each up over 26%. At the same time, consumer sentiment hit its second-lowest level since 1978, reflecting deep anxieties about inflation, job security and economic stability. With a high-stakes midterm election ahead, affordability — especially food prices — will likely be front and center in the national conversation.

Roberts: If inflation remains elevated but stable, labor market concerns could cause the Fed to continue to make rate cuts. However, if inflation pressures tick up again, the Fed will be in a policy pickle. The classical approach would be to raise rates, but that could further exacerbate any underlying risk of unemployment.

“Uncertainty” seems to be the word that comes up a lot with agriculture in 2026. What do you think are some key issues to watch, especially if you’re a farmland owner?

Roberts: While we don’t have a new Farm Bill, the One Big Beautiful Bill (OBBB) Act in July 2025 resulted in updates to several key Farm Bill ag programs, including the Federal Crop Insurance Program and Title 1 Farm Safety Net (Agriculture Risk Coverage and Price Loss Coverage).

The mid-November 2025 continuing resolution included another extension to the 2018 Farm Bill, as well as funding for USDA through the end of the federal fiscal year (September 30, 2026). Agriculture has a pretty clear picture of the next year of federal farm bill programming — plus the knowledge that even if the government would shut down again this fiscal year, USDA would remain open and funded.

Whether you’re an owner-operator or a farmland owner who’s renting to a producer, there’s a known price floor under 2026 production, via these Farm Bill programs.

Erickson: Here are four key issues to watch:

1. Crop margins under pressure. Producers are facing some of the tightest profit margins in years. Input costs — particularly for cash rents, fertilizer and equipment — remain elevated and haven’t declined in step with falling grain prices.
2. Midwest farmland values holding, but leveling farmland values in the Midwest have shown surprising resilience. While a modest pullback in 2026 would not be unexpected, a significant correction seems unlikely, barring a major policy shift or global economic disruption. Limited land supply and continued buyer interest are helping to support values. The farmland market appears more “selective” than “soft” in the Midwest.
3. Policy and global market uncertainty. Trade tensions and shifting policies — particularly with key partners such as Mexico, Canada and China — continue to add uncertainty to the market. A broader or prolonged trade dispute with key U.S. agricultural trading partners would likely pressure farm profitability and land values, while new trade agreements could provide meaningful support.
4. 10-year Treasury versus farmland returns. In the past five years, farmland values have outpaced inflation, but cash rents have lagged. This has pushed cropland returns in the Corn Belt down to around 2.7%. With the 10-year Treasury yielding 4% to 4.2%, some capital may shift away from farmland, though investors have been slow to make the shift so far.

Still, I remain bullish on farmland over the long term. As a finite asset with strong demand and a track record of historically stable returns, farmland continues to offer compelling value.

A new year brings new opportunities. From your vantage point, what are some of the bright spots in agriculture in the year ahead?

Roberts: Livestock and dairy producers are experiencing a very good economic cycle. Buoyed by lower feed prices and strong protein demand, margins are generally favorable. Areas with strong livestock and dairy production remain bright spots as I look at the year ahead, although there has been some softening in these markets in the fourth quarter of 2025.

Erickson: The OBBB made crop insurance more robust. Starting with the 2026 crop year, premium subsidies increase by 3% to 5%, depending on the coverage level selected.

OBBB also delivered meaningful tax relief. The estate tax exemption permanently increases to $15 million per individual — or $30 million per couple — indexed to inflation. That’s a big win for family farms. The bill also makes 100% bonus depreciation permanent and raises Section 179 expensing limits to $2.5 million. Another standout provision allows sellers of farmland to defer capital gains taxes over four years, provided the land has been owned or leased to a farmer for at least 10 years and remains in farm use for another 10 years.

It’s no secret that land is the lifeblood of production agriculture. As you look ahead, is there one surprising trend you are seeing with farmland?

Roberts: I’m continually encouraged to see flat but stable farmland prices, on average. This adds stability to a challenging agricultural economy.

Erickson: One surprising trend we’re seeing in farmland is the outsized role livestock is playing in supporting land values. Inflation-adjusted livestock receipts are projected to surpass crop receipts for two consecutive years — something we haven’t seen since 2014/2015. Even more remarkable, the gap favoring livestock receipts to crop receipts in 2025 is expected to be the widest since 1951. High cattle prices have been a major driver.

Another key factor to watch is diversification. By spreading risk across multiple income streams (row crops, livestock, specialty crops, direct-to-consumer outlets or renewables), farmers who diversify can maintain cash flow, even when one sector is under pressure. Diversification is a “shock absorber” that helps keep the land market steady.