Farm Bureau: USDA revises farm income higher, but input costs still bite

Source" American Farm Bureau Federation

By Faith Parum, Ph.D. and Daniel Munch, Economists, American Farm Bureau Federation

Key Takeaways

• USDA raised its 2026 net farm income forecast by $5 billion from February to $158.4 billion, and its estimate of 2025 income even more. As a result, net farm income is now expected to fall 2.6% in nominal terms and 5.5% after inflation in 2026.

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• The expense outlook has deteriorated significantly. USDA raised its 2026 production expense forecast by $15.1 billion since February to $492.8 billion. Fuel and oil expenses are now projected to jump 28.8%, fertilizer expenses are up 15.3% and livestock purchases are up 11.4% from their earlier forecast.

• Direct government payments, including ad hoc and traditional farm bill program payments, are forecast to reach $47.4 billion in 2026, up nearly 70% from 2025. Those payments provide critical support, but their size also illustrates the continued gap between market returns and the cost of producing food, fiber and fuel.

USDA's September 2026 net farm income forecast, released Sept. 3, projects that net farm income, a broad measure of farm sector profitability, will decline to $158.4 billion in 2026. That is $4.3 billion, or 2.6%, below the newly revised 2025 estimate of approximately $162.7 billion. After adjusting for inflation, the decline becomes considerably larger at $9.1 billion, or 5.5%.

At first glance, the new forecast looks better than USDA's February outlook, which placed 2026 net farm income at $153.4 billion. However, the comparison is more complicated. USDA also raised its estimate for 2025 by $8.1 billion, from $154.6 billion to $162.7 billion. Because the 2025 revision was larger than the $5 billion upward revision in the 2026 forecast, USDA now projects a steeper decline in farm income from 2025 to 2026. February's forecast anticipated only a 0.7% nominal decline in net farm income and a 2.6% inflation-adjusted decline; September now projects declines of 2.6% and 5.5%, respectively.

Overall, USDA's September forecast puts farm income above its February estimate, but the revision does not signal broad financial relief. Federal support is projected to rise nearly 70%, from $28 billion in 2025 to $47 billion in 2026--$2.7 billion higher than February's forecast. This is not all new assistance; USDA records payments when they are received, including support authorized for prior-year losses. Production expenses are now projected more than $15 billion higher, farm debt continues to rise and commodity conditions remain uneven, with stronger crop receipts offset by declines across much of the livestock sector. After inflation, net cash farm income (a slightly narrower measure of profits relative to net farm income) is still expected to fall 2.5% from 2025.

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