2026 Agriculture Projections: CoBank publishes ag industry predictions for year ahead

Throughout the past year, western ag producers continued to prove their grit and resilience, operating in tough environments shaped by unpredictable highs and lows. 

Much of the West entered the year facing persistent drought conditions and erratic precipitation patterns which complicated planting and grazing decisions. Later on, these circumstances led to another devastating wildfire season, raising concerns about resource loss, infrastructure damage and how wildfire risk has become a near-constant reality for producers in the region.

Animal health remained top of mind for yet another year, with continued surges of highly pathogenic avian influenza, a recent outbreak of equine herpesvirus and year-long concerns over the northward movement of New World screwworm toward the U.S.-Mexico Border.

On the livestock front, record-high cattle prices made headlines for weeks in a row, while national herd numbers remained lower than they have in decades. Sheep producers continued their fight against foreign imports flooding the market and regulatory burdens in regards to labor. 

President Donald Trump’s return to office resulted in both exciting wins and cautious concerns for the ag industry. 

His administration delivered meaningful reform to the National Environmental Policy Act, livestock grazing regulations, wildlife management, federal lands rules, energy expansion and estate tax, among others, while his tariff war and proposed fix for rising food costs have caused widespread apprehension.

Economy steadies 

Despite these challenges, reduced trade uncertainty, easing inflation and strong consumer demand for protein are expected to steady the nation’s rural economy in 2026, according to CoBank Knowledge Exchange’s annual year-ahead report, titled “The Year Ahead: Forces That Will Shape the U.S. Rural Economy.”

In the report, CoBank analysts note historically low volatility in equity, bond and currency markets is signaling growing confidence in the economic outlook.

While trade policy continues to be a source of uncertainty and tariffs remain in place, CoBank predicts their impact will fade by the end of the first quarter of 2026, allowing inflation to trend downward later in the year.

“The effective across-the-board tariff rate is now about 17 percent, but based on tax collections, the actual average import tax paid is only about 10 percent,” the report reads. “According to CoBank, this rate is expected to drop even further as reduced tariffs on China and imported food products take effect and more bilateral agreements are finalized.” 

With inflation easing, the Federal Reserve is expected to continue cutting interest rates in 2026. 

“Moreover, the Congressional Budget Office estimates the accelerated depreciation provisions in the One Big Beautiful Bill Act will boost gross domestic product growth by almost a full percentage point next year,” CoBank notes.

“The labor market has cooled from the post-COVID-19 cycle and is now more in line with historic norms,” the report continues, adding wage growth near four percent and unemployment below five percent remain well within the margin of safety for economic expansion in 2026. 

Grain markets struggle 

On the ag front, CoBank says 2026 is shaping up to be another challenging year for grain producers. 

Global grain and oilseed supplies remain ample, weighing heavily on prices. 

While increased biofuels production and improved export conditions are offering some optimism, most crop prices remain below the cost of production.

“Grain farmers will face hard choices for planting this spring,” CoBank states. “Current price ratios indicate soybeans stand to pull acres from all major crops in 2026. High input costs may discourage farmers from planting corn and they may switch to cheaper alternatives. Farmer affordability remains under pressure, and while corn prices have slid, fertilizer prices have not.”

Protein demand remains

The animal protein sector is expected to enter 2026 on sturdier footing.

Despite high retail prices, consumer demand for meat and poultry is projected to stay strong in 2026, supported by falling feed costs, investments in production efficiency, higher household incomes and shifting consumer preferences toward protein-rich diets. 

CoBank points out livestock supplies are likely to remain tight for the next 12 to 18 months, supporting prices but limiting widespread expansion. 

“As a result, feeding efficiencies and heavier carcasses will remain a focal point in 2026,” the report reads. “While optimism in the sector is strong, several headwinds including new and recurring livestock diseases and trade disruptions could constrain growth in the coming year.”

In the dairy sector, protein is becoming an increasing driver for milk checks as well, and CoBank points to consumer demand for protein-rich dairy products like cheese, cottage cheese and yogurt as long-term positives for the sector.

In fact, according to Circana and Dairy Management, Inc., four of the top 10 protein products for unit sales growth over the past year were dairy items.

On the other hand, while demand for full-fat dairy also remains strong, butterfat has shifted to an “oversupply situation,” prompting some processors to cap butterfat payments.

“This means protein will be the leading driver in milk checks in coming years,” CoBank states. “Shifting consumer dietary trends suggest protein markets will remain strong for many years to come.”

Food, energy and digital infrastructure

CoBank notes the food and beverage sector faces a more complicated outlook.

Restaurants are showing continued signs of weakness as consumers have started cutting back on dining out, and grocery brands are grappling with rising costs and consumer pressure to remove artificial ingredients from products.

“Most concerning for these brands is the lack of data indicating consumers actually want or will pay for these reformulated products,” CoBank says.

Meanwhile, electricity consumption is rising at its fastest pace since World War II, driven largely by demand from data centers. 

The federal government has declared a national energy emergency in response, and proposed grid reforms could significantly reshape how large power users connect to the system.

CoBank notes rural America sits at the center of this transformation. 

“The rise of artificial intelligence is fueling a historic surge in data-center spending, and hyperscalers will increasingly depend on rural America to achieve their ambitious buildout plans,” CoBank explains. “Rural areas offer what hyperscalers like Microsoft and Amazon desperately need – land for sprawling campuses and the ability to allocate data centers with major power infrastructure. Given the business and geopolitical stakes, data center operators are moving fast and writing big checks to reduce friction in rural communities.”

“While these communities face tradeoffs, rejecting data center projects could mean missing out on generational economic benefits,” CoBank adds.

Looking ahead

CoBank concludes, while 2026 is shaping up to be a year for greater economic stability, the benefits will be uneven across the ag industry, requiring producers, processors and rural communities to navigate both opportunity and constraint.

Stabilizing markets, cooling inflation and strong protein demand offer reasons for cautious optimism, while oversupplied crop markets, policy uncertainty and infrastructure challenges continue to test rural resilience. 

For producers, lenders and rural communities alike, the coming year will require careful decision-making and adaptability as the U.S. ag industry adjusts to the year ahead.

Hannah Bugas is the managing editor of the Wyoming Livestock Roundup. Send commnets on this article to roundup@wylr.net.